{"id":6254,"date":"2016-08-17T17:28:15","date_gmt":"2016-08-17T17:28:15","guid":{"rendered":"https:\/\/courses.lumenlearning.com\/masterybusiness2xngcxmasterspring2016\/?post_type=chapter&#038;p=6254"},"modified":"2017-04-19T18:15:34","modified_gmt":"2017-04-19T18:15:34","slug":"the-role-of-customers-in-marketing","status":"publish","type":"chapter","link":"https:\/\/courses.lumenlearning.com\/suny-hccc-introbusiness\/chapter\/the-role-of-customers-in-marketing\/","title":{"raw":"The Role of Customers in Marketing","rendered":"The Role of Customers in Marketing"},"content":{"raw":"<h2>What Is Marketing?<\/h2>\r\n<h2><a href=\"https:\/\/s3-us-west-2.amazonaws.com\/courses-images-archive-read-only\/wp-content\/uploads\/sites\/903\/2015\/12\/23225509\/15433515476_9a0732ae5c_k.jpg\"><img class=\"wp-image-2055 aligncenter\" src=\"https:\/\/s3-us-west-2.amazonaws.com\/courses-images\/wp-content\/uploads\/sites\/143\/2016\/08\/16210720\/15433515476_9a0732ae5c_k-1024x245.jpg\" alt=\"Panoramic color photo of busy Hong Kong intersection (not unlike Time Square in NYC) showing brightly lit digital ads and hundreds of people sitting in the street and on the sidewalks.\" width=\"1078\" height=\"258\" \/><\/a><\/h2>\r\n<strong>Marketing<\/strong> is a set of activities related to creating, communicating, delivering, and exchanging offerings that have value for others. In business, the function of marketing is to bring value to customers, whom the business seeks to identify, satisfy, and retain. This module\u00a0will emphasize the role of marketing in business, but many of the concepts will apply to non-profit organizations, advocacy campaigns, and other activities aimed at influencing perceptions and behavior.\r\n<h3>The Art of the Exchange<\/h3>\r\nIn marketing, the act of obtaining a desired object from someone by offering something of value in return is called the <strong>exchange process<\/strong>. The exchange involves:\r\n<ul>\r\n \t<li style=\"font-weight: 400;\"><strong>the customer (or buyer):<\/strong> a person or organization with a want or need who is willing to give money or some other personal resource to address this need<\/li>\r\n \t<li style=\"font-weight: 400;\"><strong>the product:<\/strong> a physical good, a service, experience or idea designed to fill the customer's want or need<\/li>\r\n \t<li style=\"font-weight: 400;\"><strong>the provider (or seller):<\/strong> the company or organization offering a need-satisfying thing, which may be a product, service, experience or idea<\/li>\r\n \t<li style=\"font-weight: 400;\"><strong>the transaction:<\/strong> the terms around which both parties agree to trade value-for-value (most often, money for product)<\/li>\r\n<\/ul>\r\nIndividuals on both sides of the exchange try to maximize rewards and minimize costs in transactions, in order to gain the most profitable outcomes. Ideally, everyone achieves a satisfactory level of reward.\r\n\r\nMarketing creates <span style=\"color: #000000;\">a <strong>bundle of<\/strong><\/span><strong>\u00a0goods and services<\/strong> that the company offers at a price to its customers. The bundle consists of a tangible good, an intangible serv<span style=\"color: #333333;\">ice or benefit, and the price of\u00a0the offering. When you compare one car to another, for example, you can evaluate each of these dimensions\u2014the tangible, the intangible, and the price\u2014separately. However, you can\u2019t buy one manufacturer\u2019s car, another manufacturer\u2019s service, and a third manufacturer\u2019s price when you actually make a choice. Together, the three make up a single firm\u2019s offer or bundle.<\/span>\r\n\r\nMarketing is also responsible for the entire\u00a0environment in which this exchange of value takes place.\r\n<ul>\r\n \t<li>Marketing identifies customers, their needs, and how much value they place on getting those needs addressed.<\/li>\r\n \t<li>Marketing informs the design of the product to ensure it meets customer needs and provides value proportional to what it costs.<\/li>\r\n \t<li>Marketing is responsible for communicating with customers about products, explaining who is offering them and why they are desirable.<\/li>\r\n \t<li>Marketing is also responsible for listening to customers and communicating back to the provider about how well they are satisfying customer needs and opportunities for improvement.<\/li>\r\n \t<li>Marketing shapes the location and terms of the transaction, as well as the experience customers have after the product is delivered.<\/li>\r\n<\/ul>\r\n<h3>Marketing Creates Value for Customers<\/h3>\r\nAccording to the influential economist and Harvard Business School professor Theodore Levitt, the purpose of all business is to \"find and keep customers.\" Marketing is instrumental in helping businesses achieve this purpose and is much more than just advertising and selling products\u00a0and collecting money. Marketing generates value by creating the connections between people and products, customers and companies.\r\n\r\nHow does this happen? Boiled down to its essence, the <strong>role of marketing<\/strong> is to <em>identify, satisfy, and retain customers<\/em>.\r\n\r\nBefore you can create anything of value, first you must <strong>identify<\/strong> a want or need that you can address, as well as the prospective customers who possess this\u00a0want or need.\r\n\r\nNext, you work to <strong>satisfy<\/strong> these customers by delivering\u00a0a product or service that addresses\u00a0these needs at the time customers\u00a0want it. Key to customer satisfaction is making sure everyone feels they benefit from the exchange. Your customer is happy with the value they get for what they pay. You are happy with the payment you receive in exchange for what you provide.\r\n\r\nEffective marketing doesn't stop there. It also needs\u00a0to <strong>retain<\/strong> customers by creating new opportunities to win customer\u00a0loyalty and business.\r\n\r\n<a href=\"https:\/\/s3-us-west-2.amazonaws.com\/courses-images-archive-read-only\/wp-content\/uploads\/sites\/903\/2015\/12\/23225733\/Role-of-Marketing-graphic-1.jpg\"><img class=\"aligncenter wp-image-3310\" src=\"https:\/\/s3-us-west-2.amazonaws.com\/courses-images\/wp-content\/uploads\/sites\/143\/2016\/08\/16210724\/Role-of-Marketing-graphic-1-1024x884.jpg\" alt=\"Title: The Role of Marketing. Identify customers: understand customer wants and needs; identify who to target and how to reach them. Satisfy customers: Make the right product or service available to the right people at the right time. Retain customers: give customers a reason to keep coming back; find new opportunities to win their business.\" width=\"600\" height=\"518\" \/><\/a>As you will learn in this module, marketing encompasses a variety of activities focused on accomplishing these objectives. How companies approach and conduct day-to-day marketing activities varies widely. For many large, highly visible companies, such as Disney-ABC, Proctor &amp; Gamble, Sony, and Toyota, marketing represents a major expenditure. Such\u00a0companies rely on effective marketing for business success, and this dependence is reflected in their organizational strategies, budget, and operations. Conversely, for other organizations, particularly those in highly regulated or less competitive industries such as utilities, social services, medical care, or businesses providing one-of-a-kind products, marketing may be much less visible. It could even be as simple as a Web site or an informational brochure.\r\n\r\nThere is no one model that guarantees marketing success. Effective marketing may be very expensive, or it may\u00a0cost next to nothing. What marketing must do in all cases is to help the organization identify, satisfy, and retain customers. Regardless of size or complexity, a marketing program is worth the costs only if it facilitates the organization's ability to reach its goals.\r\n<h2>How Companies Approach Marketing<\/h2>\r\nWhen companies develop a marketing strategy, they make decisions about the direction\u00a0that the company and their marketing efforts will take. Companies can focus on the customer, product, sales, or production. As the business environment has changed over time, so has the way that companies focus their marketing efforts.\r\n<h3>The Marketing Concept<\/h3>\r\n<em>An organization adopts the marketing concept when it takes steps to know as much about the consumer as possible, coupled with a decision to base marketing, product, and even strategy decisions on this information.<\/em> These organizations start with the customers\u2019 needs and work backward from there to create value, rather than starting with some other factor like production capacity or an innovative invention. They operate on the assumption that\u00a0success depends on\u00a0doing better than competitors at understanding, creating, delivering, and communicating value to\u00a0their target customers.\r\n<h3>The Product Concept<\/h3>\r\nBoth historically and currently, many businesses do not follow the marketing concept. For many years, companies such as Texas Instruments and Otis Elevator have followed a <em>product orientation<\/em>, in which\u00a0the primary organizational focus is technology and innovation. All parts of these organizations invest heavily in building and showcasing impressive features and product advances, which are the areas in\u00a0which these companies prefer to compete. This approach is also known as the <em>product concept<\/em>. Rather than focusing on a deep understanding of customer needs, these companies assume that a technically superior or less expensive product will sell itself. While this approach can be very profitable, there is a high risk of losing touch with what customers actually want. This leaves product-oriented companies vulnerable to more customer-oriented competitors.\r\n<h3>The Sales Concept<\/h3>\r\nOther companies follow a <em>sales orientation<\/em>. These businesses emphasize the sales process and try to make it as effective as possible. While companies in any industry may adopt the sales concept, multilevel-marketing companies such as Herbalife and Amway generally fall into this category. Many business-to-business companies with dedicated sales teams also fit this profile. These organizations assume that a good salesperson with the right tools and incentives is capable of selling almost\u00a0anything. Sales and marketing techniques include aggressive sales methods, promotions, and other activities that support the sale. Often, this focus on the selling process may ignore the customer or view the customer as someone to be manipulated. These companies sell what they make, which isn't necessarily\u00a0what customers want.\r\n<h3>The Production Concept<\/h3>\r\n[caption id=\"attachment_2506\" align=\"alignright\" width=\"251\"]<a href=\"https:\/\/s3-us-west-2.amazonaws.com\/courses-images-archive-read-only\/wp-content\/uploads\/sites\/903\/2015\/12\/23225605\/Ford_assembly_line_-_1913.jpg\"><img class=\"wp-image-2506\" src=\"https:\/\/s3-us-west-2.amazonaws.com\/courses-images\/wp-content\/uploads\/sites\/143\/2016\/08\/16210740\/Ford_assembly_line_-_1913.jpg\" alt=\"An old photograph of people building hubcaps on an assembly line.\" width=\"251\" height=\"221\" \/><\/a> Ford assembly line, 1913, Highland Park, Michigan[\/caption]\r\n\r\nThe <em>production concept<\/em> is followed by\u00a0organizations that are striving for low-production costs, highly efficient processes, and mass distribution (which enables\u00a0them to deliver low-cost goods at the best price). This approach came into popularity during the Industrial Revolution of the late 1800s, when businesses were beginning to exploit opportunities associated with automation and mass production. Production-oriented companies\u00a0assume that customers care most about low-cost products being readily available and less about\u00a0specific product features. Henry Ford\u2019s success with the groundbreaking assembly-line\u2013built Model T is a classic example of the production concept in action. Today this approach is still widely successful in developing countries seeking economic gains in\u00a0the manufacturing sector.\r\n<h3>Seeing the Whole Picture<\/h3>\r\nSavvy\u00a0businesses acknowledge the importance of product features, production, and sales, but they also realize that in today's business environment a marketing orientation will lead to the greatest success when businesses continuously collect information about customers\u2019 needs and competitors\u2019 capabilities; share the information across departments; and use the information to create a competitive advantage by increasing value for customers.\r\n<h2>What Is Value?<\/h2>\r\nMarketing exists to help organizations understand, reach, and deliver\u00a0value to\u00a0their customers.\u00a0In it's simplest form, <strong>value<\/strong> is the\u00a0measure of the benefit gained from a product or service relative to\u00a0the full cost of the item.\u00a0In the process of the marketing exchange, value must be created.\r\n<div class=\"textbox shaded\" style=\"text-align: center;\">Value = benefit - cost<\/div>\r\nLet's look at a\u00a0simple example: If you and I decide to give each other a $5 bill at the same moment, is value created? I hand my $5 bill to you, and you hand yours to me. It is hard to say that either of us receives a benefit greater than the $5 bill we just received. There is no value in the exchange.\r\n\r\nNow, imagine that you are passing by a machine that dispenses bus tickets. The machine is malfunctioning and will only accept $1 bills. The bus is about to arrive and a man in front of the machine asks if you would be willing to give him four <span style=\"color: #333333;\">$1 bills in exchange for a $5 bill. You could, of course, decide to make change for him (and give him five $1 bills), making this an \"even exchange.\" But let's say you agree to his proposal of exchanging four $1 bills for a $5. In that moment a $1 bill is worth $1.25 to him. How does that make sense in the v<\/span>alue equation? From his perspective, the ability to use the bus ticket dispenser\u00a0<em>in that moment<\/em>\u00a0adds value in the transaction.\r\n\r\nValue is not simply a question of the financial costs and financial benefits. It includes perceptions of benefit that are different for every person. The marketer has to understand what is of greatest value to the target customer, and then use that information to develop a total\u00a0offering that <em>creates value<\/em>.\r\n<h3>Value Is More Than Price<\/h3>\r\nYou will \u00a0notice that we did not express value as value = benefit - price. \u00a0Price plays an important role in defining value, but it's not the only consideration. Let's look at a few typical examples:\r\n<ul>\r\n \t<li>Two products have exactly the same ingredients, but a customer selects the\u00a0higher-priced product because of the name brand<\/li>\r\n<\/ul>\r\nFor the marketer, this means that the brand is <em>adding value<\/em> in the transaction.\r\n<ul>\r\n \t<li>A customer shopping online selects a\u00a0product but abandons the order before paying because there\u00a0are too many steps in the purchase process<\/li>\r\n<\/ul>\r\nThe inconvenience of filling in many forms, or concerns about providing personal information, can <em>add cost\u00a0<\/em>(which will subtract from the value the customer perceives).\r\n<ul>\r\n \t<li>An individual who is interested in a political cause commits to attending a meeting, but cancels when he realizes that he doesn't know anyone attending and that the meeting is on the other side of town.<\/li>\r\n<\/ul>\r\nFor this person, the\u00a0benefit of attending and participating is lower because of costs related to personal connection and convenience.\r\n\r\nAs you saw in these examples, the process of determining the value of an offering and then aligning it with the wants and needs of a target customer is challenging. As you continue through this section, think about what <em>you<\/em> value and how that impacts the buying decisions you make every day.\r\n<h3>Value in a Competitive Marketplace<\/h3>\r\nAs if understanding individual perceptions of value weren't difficult enough, the presence of competitors further complicates perceptions of value. Customers instinctively make choices between competitive offerings based on <em>perceived value<\/em>.\r\n\r\n<a href=\"https:\/\/s3-us-west-2.amazonaws.com\/courses-images-archive-read-only\/wp-content\/uploads\/sites\/903\/2015\/12\/23225540\/6174240463_b5dbf2d31c_o.jpg\"><img class=\"wp-image-2370 alignright\" src=\"https:\/\/s3-us-west-2.amazonaws.com\/courses-images\/wp-content\/uploads\/sites\/143\/2016\/08\/16210834\/6174240463_b5dbf2d31c_o-1024x683.jpg\" alt=\"A view of the Seattle, Washington, skyline at dusk. The Seattle Space Needle is in the foreground.\" width=\"276\" height=\"184\" \/><\/a>\r\n\r\nImagine that you are traveling to Seattle, Washington, with a group of six\u00a0friends for a school event. You have the option to stay at a Marriott Courtyard Hotel that is located next to the event venue for $95 per night. If you pay the \"additional person fee,\" you could share the room with one friend for a cost of $50 per night. However, one of your friends finds an AirBnB listing for\u00a0an entire\u00a0apartment that sleeps six people. Cost: $280 per night. That takes the price down to $40 per night, but the apartment is\u00a0five miles away from the venue and, since there are seven of you, you would likely be sleeping on a couch or fighting for a bed. It has a more personal feel and a kitchen, but you will really be staying in someone else's place with your friends. It's an interesting dilemma. Regardless of which option you would really choose, consider the differences in the value of each and how the presence of both options generates unavoidable comparisons: the introduction of\u00a0the AirBnb alternative has the effect of highlighting new shortcomings and benefits of the\u00a0Marriott Courtyard hotel room.\r\n<h3>Competition, Substitutes and Differentiation<\/h3>\r\nAlternatives generally fall into two categories: competitors and substitutes. A <strong>competitor<\/strong> is providing the same offering but is accentuating different features and benefits. If, say, you are evaluating\u00a0a Marriott Courtyard hotel room vs.\u00a0a\u00a0Hilton Hampton Inn hotel room, then you are looking at\u00a0<em>competitive offerings<\/em>. Both offerings are hotel rooms provided by different companies. The service includes different features, and the price and location vary, the sum of\u00a0which creates\u00a0different perceptions of value for customers.\r\n\r\nAirBnb is a service that allows individuals to rent out their homes, apartments, or a single room. AirBnb does not offer hotel rooms; it offers an alternative to, or substitute<em>\u00a0<\/em>for, a hotel room.\u00a0<strong><em>Substitute offerings<\/em><\/strong> are viewed by the user as alternatives. The substitution is not a perfect replication of the offering, which means that it will provide different value to customers.\r\n\r\nCompetitors and substitutes force the marketer to identify the aspects of the\u00a0offering that provide unique value vis-\u00e0-vis the alternatives. We refer to this as differentiation. <strong>Differentiation<\/strong> is simply the process of identifying and optimizing the elements of an offering that provide unique value to customers. Sometimes organizations refer to this process as competitive differentiation, since it is very focused on optimizing value in the context of the competitive landscape.\r\n\r\nFinally, organizations seek to create an advantage in the marketplace whereby an organization's offerings provide greater value because of a unique strategy, asset, or approach that the firm uses that other cannot easily copy. This is a <strong>competitive advantage<\/strong>. The American Marketing Association defines competitive advantage as \"as total offer, vis-\u00e0-vis relevant competition, that is more attractive to customers. It exists when the competencies of a firm permit the firm to outperform its competitors.\" When a company can create greater value for customers than its competitors, it has a competitive advantage.\r\n<h2 class=\"im_title im_editable im_block\">What Is a Value Proposition?<\/h2>\r\nWe have discussed the complexity of understanding customer perceptions of value. As the company seeks to understand and optimize the value of its offering, it also must communicate the core elements of value to potential customers. Marketers do this through a <strong>value proposition<\/strong>, defined as follows:\r\n<blockquote>A business or marketing statement that summarizes why a consumer should buy a product or use a service. This statement should convince a potential consumer that one particular product or service will add more value or better solve a problem than other similar offerings.[footnote]http:\/\/www.investopedia.com\/terms\/v\/valueproposition.asp[\/footnote]<\/blockquote>\r\n<div class=\"wp-nocaption wp-image-2382 alignleft\"><a href=\"https:\/\/s3-us-west-2.amazonaws.com\/courses-images-archive-read-only\/wp-content\/uploads\/sites\/903\/2015\/12\/23225544\/14086869112_3a3ae3c9b7_k-1.jpg\"><img class=\"wp-image-2382 alignleft\" src=\"https:\/\/s3-us-west-2.amazonaws.com\/courses-images-archive-read-only\/wp-content\/uploads\/sites\/903\/2015\/12\/23225544\/14086869112_3a3ae3c9b7_k-1-683x1024.jpg\" alt=\"Photo of seven green apples surrounding one red apple.\" width=\"250\" height=\"375\" \/><\/a><\/div>\r\nIt is difficult to create an effective value proposition because it requires the marketer to distill many different elements of value and differentiation into one simple statement that can be easily read and understood. Despite the challenge, it is very important to create an effective value proposition.\u00a0The value proposition focuses marketing efforts on the unique benefit to customers. This helps focus the offering on the customer and, more specifically, on the unique value to the customer.\u00a0Also, the value proposition is a message, and the audience is the target customer. You want your value proposition to communicate, very succinctly, the promise of unique value in your\u00a0offering.\r\n\r\nA value proposition needs to very simply answer the question: Why should someone buy what you are offering?\u00a0If you look closely at this question it contains three components:\r\n<ul>\r\n \t<li><strong>Who?\u00a0<\/strong>The value proposition does not name the target buyer, but it must show clear value to the target buyer.<\/li>\r\n \t<li><strong>What?<\/strong> The offering needs to be defined in the context of that buyer.<\/li>\r\n \t<li><strong>Why? <\/strong>It must show that the\u00a0offering is uniquely valuable to the buyer.<\/li>\r\n<\/ul>\r\n<h2>How Do You Create an\u00a0Effective Value Proposition?<\/h2>\r\nWhen creating or evaluating a value proposition, it is helpful to step away from the long lists of features and benefits and deep competitive analysis. Stick to the simple, and strive for focus and clarity.\u00a0A value proposition should be clear, compelling, and differentiating<strong>.<\/strong>\r\n<ul>\r\n \t<li>Clear: short and direct; immediately identifies\u00a0both the offering and the value or benefit<\/li>\r\n \t<li>Compelling: conveys the benefit in a way that motivates the buyer to act<\/li>\r\n \t<li>Differentiating: sets the offering apart or differentiates it from other offerings<\/li>\r\n<\/ul>\r\n<h2>Marketing and Customer Relationships<\/h2>\r\n<h3>Why Customers Matter<\/h3>\r\nMarketing exists to help organizations understand, reach, and deliver\u00a0value to\u00a0their customers. For this reason, the customer is considered the cornerstone of marketing.\r\n\r\nWith this in mind, what is likely to happen when an organization\u00a0doesn\u2019t understand or pay attention to what its customers want? What if an organization doesn\u2019t even really understand who its customers\u00a0are?\r\n\r\nOne of the world\u2019s best-known brands, Coca-Cola, provides a high-profile example of misunderstanding customer \u201cwants.\u201d \u00a0In the following video, Roberto Goizueta\u2014in his only on-camera interview on this topic\u2014recounts the disastrous launch of New Coke in 1985 and describes the lessons the company learned. Goizueta was chairman, director, and chief executive officer of the Coca-Cola Company from August 1980 until his death in October 1997.\r\n\r\nhttps:\/\/youtu.be\/BmQs8g9ytRA\r\n<h3>Customer Relationship Management: A Strategic Imperative<\/h3>\r\nWe have stated that the central purpose of marketing is to help organizations identify, satisfy, and retain their customers. These three activities lay the groundwork for what has become a strategic imperative in modern marketing: customer relationship management.\r\n\r\nTo a student of marketing in the digital age, the idea of relationship building between customers and companies may seem obvious\u00a0and commonplace. It certainly is a\u00a0natural\u00a0outgrowth of the marketing concept, which orients entire organizations around understanding and addressing customer needs. But only in recent decades has technology made it possible for companies to capture and utilize information about their customers to such a great extent and in such meaningful ways. The Internet and digital social media have created new platforms for customers and product providers to find and communicate with\u00a0one\u00a0another. As a result, there are more tools now than ever before to help companies create, maintain, and manage customer relationships.\r\n<h4>Maximizing Customer Lifetime Value<\/h4>\r\nCentral to these developments is the concept of customer lifetime value. Customer lifetime value predicts how much profit is associated with a customer during\u00a0the course of their lifetime relationship with a company.<span style=\"color: #000000;\"><a style=\"color: #000000;\" href=\"http:\/\/dictionary.cambridge.org\/us\/dictionary\/english\/customer-lifetime-value\">[footnote]http:\/\/dictionary.cambridge.org\/us\/dictionary\/english\/customer-lifetime-value[\/footnote]<\/a><\/span>\u00a0One-time customers usually have a relatively low customer lifetime value, while frequent, loyal, repeat-customers typically have a high customer lifetime value.\r\n\r\nHow do\u00a0companies develop strong, ongoing relationships with customers who are likely to have a high customer lifetime value? Through marketing, of course.\r\n\r\nMarketing applies a customer-oriented mindset and, through particular marketing activities, tries to make initial contact with customers and move them through various stages of the relationship\u2014all with the goal of increasing lifetime customer value. These activities are summarized in the table below.\r\n<div>\r\n<table>\r\n<tbody>\r\n<tr>\r\n<td><strong>Relationship Stage<\/strong><\/td>\r\n<td><strong>Typical Marketing Activities<\/strong><\/td>\r\n<\/tr>\r\n<tr>\r\n<td>Meeting and Getting Acquainted<\/td>\r\n<td>\r\n<ul>\r\n \t<li style=\"font-weight: 400;\">Find desirable target customers, including those likely to deliver a high customer lifetime value<\/li>\r\n \t<li style=\"font-weight: 400;\">Understand what these customers want<\/li>\r\n \t<li style=\"font-weight: 400;\">Build awareness and demand for what you offer<\/li>\r\n \t<li style=\"font-weight: 400;\">Capture new business<\/li>\r\n<\/ul>\r\n<\/td>\r\n<\/tr>\r\n<tr>\r\n<td>Providing a Satisfying Experience<\/td>\r\n<td>\r\n<ul>\r\n \t<li style=\"font-weight: 400;\">Measure and improve customer satisfaction<\/li>\r\n \t<li style=\"font-weight: 400;\">Track how customers\u2019 needs and wants evolve<\/li>\r\n \t<li style=\"font-weight: 400;\">Develop customer confidence, trust, and goodwill<\/li>\r\n \t<li style=\"font-weight: 400;\">Demonstrate and communicate competitive advantage<\/li>\r\n \t<li style=\"font-weight: 400;\">Monitor and counter competitive forces<\/li>\r\n<\/ul>\r\n<\/td>\r\n<\/tr>\r\n<tr>\r\n<td>Sustain a Committed Relationship<\/td>\r\n<td>\r\n<ul>\r\n \t<li style=\"font-weight: 400;\">Convert contacts into loyal repeat customers, rather than one-time customers<\/li>\r\n \t<li style=\"font-weight: 400;\">Anticipate and respond to evolving needs<\/li>\r\n \t<li style=\"font-weight: 400;\">Deepen relationships, expand reach of and reliance on what you offer<\/li>\r\n<\/ul>\r\n<\/td>\r\n<\/tr>\r\n<\/tbody>\r\n<\/table>\r\n<\/div>\r\nAnother benefit of effective customer relationship management is that it reduces the cost of business and increases profitability. As a rule, winning a new customer\u2019s business takes significantly more time, effort, and marketing resources than it does\u00a0to renew or expand business with an existing customer.\r\n<h3>Customer Relationship As Competitive Advantage<\/h3>\r\n<a href=\"https:\/\/s3-us-west-2.amazonaws.com\/courses-images-archive-read-only\/wp-content\/uploads\/sites\/903\/2015\/12\/23225607\/10147130996_e8bbc8d83e_b-2.jpg\"><img class=\"alignright wp-image-2512\" src=\"https:\/\/s3-us-west-2.amazonaws.com\/courses-images\/wp-content\/uploads\/sites\/143\/2016\/08\/16210744\/10147130996_e8bbc8d83e_b-2-581x1024.jpg\" alt=\"A woman wearing a cocktail dress and heels.\" width=\"250\" height=\"441\" \/><\/a>\r\n\r\nAs the global marketplace provides more and more choices for consumers, relationships can become a primary driver of why a customer chooses one company over others (or chooses none at all). When customers feel satisfaction with and affinity for a specific company or product, it simplifies their buying choices.\r\n\r\nFor example, why might a woman shopping for a cocktail dress choose to go to Nordstrom rather than Macy\u2019s or Dillard's, or pick from an army of online stores? Possibly\u00a0because she prefers the selection of dresses at Nordstrom and the store's atmosphere. It's much more likely, though, that thanks to Nordstrom's practices, this shopper\u00a0has a relationship with an attentive\u00a0sales associate who has helped her find great outfits and accessories in the past. She also knows about the store's\u00a0customer-friendly return policy, which might come in handy if she needs to return something.\r\n\r\nA\u00a0company like Nordstrom delivers such satisfactory experiences that its customers return again and again. A consistently positive customer experience matures into a relationship in which the customer becomes increasingly receptive to the company and its products. Over time, the customer relationship gives Nordstrom\u00a0a competitive advantage over other traditional department stores and online retailers.\r\n<h3>When Customers Become Your Best Marketing Tool<\/h3>\r\nCustomer testimonials and recommendations have always been powerful marketing tools. They often work to persuade new customers to give something a try. In today\u2019s digital media landscape there is unprecedented opportunity for companies to engage customers as credible\u00a0advocates. When organizations invest in building strong customer relationships, these activities become particularly fruitful.\r\n\r\nFor example, service providers like restaurateurs, physical therapists, and dentists frequently ask regular patrons and patients to write reviews about their real-life experiences on popular recommendation sites like Yelp and Google+. Product providers do the same on sites like Amazon and CNET.com. Although companies risk getting a bad review, they usually gain more by harnessing the credible voices and authentic experiences of customers they have served. In this process they also gain invaluable feedback about what\u2019s working or not working for their customers. Using this input, they can retool their products or approach to better match what customers want and improve business over time.\r\n\r\n<a href=\"https:\/\/s3-us-west-2.amazonaws.com\/courses-images-archive-read-only\/wp-content\/uploads\/sites\/903\/2015\/12\/23225608\/Por_Que_No__Taqueria_-_339_Photos_-_Mexican_-_Southeast_Portland_-_Portland__OR_-_Reviews_-_Menu_-_Yelp.jpg\"><img class=\"wp-image-2515 aligncenter\" src=\"https:\/\/s3-us-west-2.amazonaws.com\/courses-images\/wp-content\/uploads\/sites\/143\/2016\/08\/16210747\/Por_Que_No__Taqueria_-_339_Photos_-_Mexican_-_Southeast_Portland_-_Portland__OR_-_Reviews_-_Menu_-_Yelp-1024x737.jpg\" alt=\"Por_Que_No__Taqueria_-_339_Photos_-_Mexican_-_Southeast_Portland_-_Portland__OR_-_Reviews_-_Menu_-_Yelp\" width=\"726\" height=\"522\" \/><\/a>\r\n\r\nAdditionally, smart marketers know that when people take a public stance on\u00a0a product or issue, they tend to become more committed to that position. Thus, customer relationship management can become a virtuous cycle. As customers have more exposure and positive interaction with a company and its products, they want to become more deeply engaged, and they are more likely to become vocal evangelists who share their opinions publicly. Customers become an active part of a marketing engine that generates new business and retains loyal customers for repeat business and increased customer lifetime value.\r\n<h2>Influences on Consumer Decisions<\/h2>\r\nWhile the decision-making process itself appears\u00a0quite standardized, no two people make a decision in exactly the same way. People have many beliefs and behavioral tendencies\u2014some controllable, some beyond our control. How all these factors interact with each other ensures that each of us is unique in our consumer actions and choices.\r\n\r\nAlthough it isn't feasible for marketers to react to the complex, individual profiles of every single consumer, it is possible to identify factors that tend to influence most consumers in predictable ways.\r\n\r\nThe factors that influence the consumer problem-solving process are many and complex. For example, as groups, men and women express very different needs and behaviors regarding personal-care products. Families with young children tend to make different dining-out choices than single and married people with no children. A\u00a0consumer with a lot of prior purchasing experience in a product category might approach the decision differently from someone with no experience. As marketers gain a better understanding of these influencing factors, they can draw more accurate conclusions about consumer behavior.\r\n\r\nWe can group these influencing factors into four\u00a0sets, illustrated in the figure below:\r\n<ul>\r\n \t<li><strong>Situational Factors<\/strong>\u00a0pertain to the consumer\u2019s level of involvement in a\u00a0buying task and the market offerings that are available<\/li>\r\n \t<li><strong>Personal Factors<\/strong> are individual\u00a0characteristics and traits such as age, life stage, economic situation, and personality<\/li>\r\n \t<li><strong>Psychological Factors<\/strong> relate to the consumer\u2019s motivation, learning,\u00a0socialization, attitudes, and beliefs<\/li>\r\n \t<li><strong>Social\u00a0Factors<\/strong> pertain to the influence of culture, social class, family, and reference groups<\/li>\r\n<\/ul>\r\n<a href=\"https:\/\/s3-us-west-2.amazonaws.com\/courses-images-archive-read-only\/wp-content\/uploads\/sites\/903\/2016\/01\/23230304\/Influencing-Consumer-Decision-final.jpg\" rel=\"attachment wp-att-5188\"><img class=\"aligncenter wp-image-5188\" src=\"https:\/\/s3-us-west-2.amazonaws.com\/courses-images\/wp-content\/uploads\/sites\/143\/2016\/09\/21232446\/Influencing-Consumer-Decision-final-1024x651.jpg\" alt=\"Factors Influencing Consumer Decisions. Situational factors: buying task, marketing offerings. Personal factors: demographics, life stage, lifestyle, personality. Psychological factors: motivation, learning, attitude and beliefs. Social factors: culture\/subculture, social class, family, reference groups. The consumer decision-making process: 1, Need recognition. 2, Information searching and processing. 3, Identification and evaluation of alternatives. 4, purchase decision. 5, post-purchase behavior.\" width=\"775\" height=\"493\" \/><\/a>\r\n<h2>Buying-Process Stages<\/h2>\r\n<h3>The Consumer Decision Process<\/h3>\r\nFigure 1,\u00a0below, outlines the process a consumer goes through in making a purchase decision. Once the process is started, a potential buyer can withdraw at any stage before making the actual purchase. This six-stage process represents the steps people undergo\u00a0when they make a conscious effort to learn about the options\u00a0and select a product\u2013the first time they purchase a product, for instance, or when buying high-priced, long-lasting items they don\u2019t purchase frequently. This is called <em>complex<\/em> <em>decision<\/em> <em>making<\/em>.\r\n\r\n[caption id=\"attachment_5208\" align=\"aligncenter\" width=\"525\"]<a href=\"https:\/\/s3-us-west-2.amazonaws.com\/courses-images-archive-read-only\/wp-content\/uploads\/sites\/903\/2016\/01\/23230311\/Consumer-Decisions-Process-Final.jpg\" rel=\"attachment wp-att-5208\"><img class=\"wp-image-5208\" src=\"https:\/\/s3-us-west-2.amazonaws.com\/courses-images\/wp-content\/uploads\/sites\/143\/2016\/09\/21232440\/Consumer-Decisions-Process-Final-900x1024.jpg\" alt=\"The Consumer Decision-Making Process. For complex and simple decision making. Step 1, Need recognition. Step 2, Information searching and processing. Step 3, identification and evaluation of alternatives. Step 4, purchase decision. Step 5, Post-purchase behavior.\" width=\"525\" height=\"597\" \/><\/a> Figure 1[\/caption]\r\n\r\nFor many products, the purchasing behavior is routine: you notice a need and you satisfy that need according to your habit of repurchasing the same brand or the cheapest brand or the most convenient alternative, depending on your personal assessment of trade-offs and value. In these situations, you have learned from your past experiences what will best satisfy your need, so you can bypass the second and third stages of the process. This is called <em>simple decision making<\/em>. However, if something changes appreciably (price, product, availability, services), then you may re-enter the full decision process and consider alternative brands.\r\n\r\nThe following section discusses each step of the consumer decision-making process.\r\n<h4>Need Recognition<\/h4>\r\nThe first step of the consumer decision process is recognizing that there is a problem\u2013or unmet need\u2013and that this need warrants some action. Whether we act to resolve a particular problem depends upon two factors: (1) the magnitude of the difference between what we have and what we need, and (2) the importance of the problem. A man\u00a0may desire\u00a0a new Lexus\u00a0and own a five-year-old Ford Focus. The discrepancy may be fairly large but relatively unimportant compared to the other problems he faces. Conversely, a woman\u00a0may own a two-year-old car that is running well, but for various reasons she considers\u00a0it extremely important to purchase another car this year. Consumers\u00a0do not move on to the next step until they have confirmed that their specific needs are important enough to act on.\r\n<h4>Information Search<\/h4>\r\nAfter recognizing a need, the prospective consumer may seek information to help identify and evaluate alternative products, services, experiences, and outlets that will meet that need. Information may\u00a0come from any number of sources: family and friends, search engines, Yelp reviews, personal observation, <em>Consumer Reports<\/em>, salespeople, product samples, and so forth. Which sources are most important depends on the individual and the type of purchase he or she is\u00a0considering.\r\n\r\nThe information-search process\u00a0can also identify new needs. As a tire shopper looks for information, she may decide that the tires are not the real problem, but instead she needs a new car. At this point, her newly perceived\u00a0need may trigger a new information search.\r\n<h4>Evaluation of Alternatives<\/h4>\r\nAs a consumer finds and processes information about the problem she is trying to solve, she identifies the alternative products, services, and outlets that are viable options. The next step is to evaluate these alternatives and make a choice, assuming a choice is possible that meets the consumer\u2019s financial and psychological requirements. Evaluation criteria vary from consumer to consumer and from purchase to purchase, just as the needs and information sources vary. One consumer may consider price most important while another puts more weight on quality or convenience.\r\n<div class=\"wp-nocaption wp-image-3528 alignright\"><a href=\"https:\/\/s3-us-west-2.amazonaws.com\/courses-images-archive-read-only\/wp-content\/uploads\/sites\/903\/2016\/01\/23225759\/2204542748_763da79d26_b.jpg\"><img class=\"wp-image-3528 alignright\" src=\"https:\/\/s3-us-west-2.amazonaws.com\/courses-images\/wp-content\/uploads\/sites\/143\/2016\/09\/21232443\/2204542748_763da79d26_b-683x1024.jpg\" srcset=\"https:\/\/s3-us-west-2.amazonaws.com\/courses-images-archive-read-only\/wp-content\/uploads\/sites\/903\/2016\/01\/23225759\/2204542748_763da79d26_b-200x300.jpg 200w, https:\/\/s3-us-west-2.amazonaws.com\/courses-images-archive-read-only\/wp-content\/uploads\/sites\/903\/2016\/01\/23225759\/2204542748_763da79d26_b.jpg 683w, https:\/\/s3-us-west-2.amazonaws.com\/courses-images-archive-read-only\/wp-content\/uploads\/sites\/903\/2016\/01\/23225759\/2204542748_763da79d26_b-350x525.jpg 350w\" alt=\"Young man holding a green vacuum cleaner and smiling\" width=\"200\" height=\"300\" \/><\/a><\/div>\r\nConsider a situation in which\u00a0you are buying a new vacuum cleaner. During your information search process, you identified five leading models in online reviews, as well as a set of evaluation criteria that are most important to you: \u00a01) price, 2) suction power, 3) warranty, 4) weight, 5) noise level, and 6) ease of using attachments. After visiting Sears and Home Depot to check out all the options in person, you\u2019re torn between two models you short-listed. Finally you make the agonizing choice, and the salesperson heads to the warehouse\u00a0to get one for you. He returns\u00a0with bad news: The vacuum cleaner is out of stock, but a new shipment is expected in three days. Strangely relieved, you take that as a sign to go for the other model, which happens to be in stock. Although convenience wasn\u2019t on your original list of selection criteria, you need the\u00a0vacuum cleaner before the party you\u2019re having\u00a0the next day. You pick\u00a0the number-two choice and never look back.\r\n<h4>The Purchase Decision<\/h4>\r\nAfter much searching and evaluating (or perhaps very little), consumers at some point have to decide whether they are going to buy. Anything marketers can do to simplify purchasing will be attractive to buyers. For example, in advertising, marketers might\u00a0suggest the best size of product for a particular use or the right wine to drink with a particular food. Sometimes several decision situations can be combined and marketed as one package. For example, travel agents often package travel tours, and stores that sell appliances try to sell them with add-on warranties.\r\n<h4>Postpurchase Behavior<\/h4>\r\nAll the behavior determinants and the steps of the buying process up to this point take place before or during the time a purchase is made. However, a consumer\u2019s feelings and evaluations after the sale are also significant to a marketer, because they can influence repeat sales and what the customer tells others about the product or brand.\r\n\r\nMarketing is all about keeping the customer happy at every stage of the decision-making\u00a0process, including postpurchase. It is normal for\u00a0consumers to experience some postpurchase anxiety after any significant or nonroutine purchase. This anxiety reflects a phenomenon called <em>cognitive dissonance<\/em>. According to this theory, people strive for consistency among their cognitions (knowledge, attitudes, beliefs, and values). When there are inconsistencies, dissonance arises, which people try to eliminate.\r\n\r\nMarketers may take specific steps to reduce postpurchase dissonance. One obvious way is to help ensure delivery of a quality solution that will satisfy customers. Another step is to develop advertising and new-customer communications that\u00a0stress the many positive attributes or confirm the popularity of the product. Providing personal reinforcement has proven effective with big-ticket items such as automobiles and major appliances. Salespeople in these areas may send cards or even make personal calls in order to reassure customers about their purchase.\r\n<h2>Check Your Understanding<\/h2>\r\nAnswer the question(s) below to see how well you understand the topics covered above. This short quiz does <strong>not<\/strong> count toward your grade in the class, and you can retake it an unlimited number of times.\r\n\r\nUse this quiz to check your understanding and decide whether to (1) study the previous section further or (2) move on to the next section.\r\n\r\nhttps:\/\/assessments.lumenlearning.com\/assessments\/3050","rendered":"<h2>What Is Marketing?<\/h2>\n<h2><a href=\"https:\/\/s3-us-west-2.amazonaws.com\/courses-images-archive-read-only\/wp-content\/uploads\/sites\/903\/2015\/12\/23225509\/15433515476_9a0732ae5c_k.jpg\"><img loading=\"lazy\" decoding=\"async\" class=\"wp-image-2055 aligncenter\" src=\"https:\/\/s3-us-west-2.amazonaws.com\/courses-images\/wp-content\/uploads\/sites\/143\/2016\/08\/16210720\/15433515476_9a0732ae5c_k-1024x245.jpg\" alt=\"Panoramic color photo of busy Hong Kong intersection (not unlike Time Square in NYC) showing brightly lit digital ads and hundreds of people sitting in the street and on the sidewalks.\" width=\"1078\" height=\"258\" \/><\/a><\/h2>\n<p><strong>Marketing<\/strong> is a set of activities related to creating, communicating, delivering, and exchanging offerings that have value for others. In business, the function of marketing is to bring value to customers, whom the business seeks to identify, satisfy, and retain. This module\u00a0will emphasize the role of marketing in business, but many of the concepts will apply to non-profit organizations, advocacy campaigns, and other activities aimed at influencing perceptions and behavior.<\/p>\n<h3>The Art of the Exchange<\/h3>\n<p>In marketing, the act of obtaining a desired object from someone by offering something of value in return is called the <strong>exchange process<\/strong>. The exchange involves:<\/p>\n<ul>\n<li style=\"font-weight: 400;\"><strong>the customer (or buyer):<\/strong> a person or organization with a want or need who is willing to give money or some other personal resource to address this need<\/li>\n<li style=\"font-weight: 400;\"><strong>the product:<\/strong> a physical good, a service, experience or idea designed to fill the customer&#8217;s want or need<\/li>\n<li style=\"font-weight: 400;\"><strong>the provider (or seller):<\/strong> the company or organization offering a need-satisfying thing, which may be a product, service, experience or idea<\/li>\n<li style=\"font-weight: 400;\"><strong>the transaction:<\/strong> the terms around which both parties agree to trade value-for-value (most often, money for product)<\/li>\n<\/ul>\n<p>Individuals on both sides of the exchange try to maximize rewards and minimize costs in transactions, in order to gain the most profitable outcomes. Ideally, everyone achieves a satisfactory level of reward.<\/p>\n<p>Marketing creates <span style=\"color: #000000;\">a <strong>bundle of<\/strong><\/span><strong>\u00a0goods and services<\/strong> that the company offers at a price to its customers. The bundle consists of a tangible good, an intangible serv<span style=\"color: #333333;\">ice or benefit, and the price of\u00a0the offering. When you compare one car to another, for example, you can evaluate each of these dimensions\u2014the tangible, the intangible, and the price\u2014separately. However, you can\u2019t buy one manufacturer\u2019s car, another manufacturer\u2019s service, and a third manufacturer\u2019s price when you actually make a choice. Together, the three make up a single firm\u2019s offer or bundle.<\/span><\/p>\n<p>Marketing is also responsible for the entire\u00a0environment in which this exchange of value takes place.<\/p>\n<ul>\n<li>Marketing identifies customers, their needs, and how much value they place on getting those needs addressed.<\/li>\n<li>Marketing informs the design of the product to ensure it meets customer needs and provides value proportional to what it costs.<\/li>\n<li>Marketing is responsible for communicating with customers about products, explaining who is offering them and why they are desirable.<\/li>\n<li>Marketing is also responsible for listening to customers and communicating back to the provider about how well they are satisfying customer needs and opportunities for improvement.<\/li>\n<li>Marketing shapes the location and terms of the transaction, as well as the experience customers have after the product is delivered.<\/li>\n<\/ul>\n<h3>Marketing Creates Value for Customers<\/h3>\n<p>According to the influential economist and Harvard Business School professor Theodore Levitt, the purpose of all business is to &#8220;find and keep customers.&#8221; Marketing is instrumental in helping businesses achieve this purpose and is much more than just advertising and selling products\u00a0and collecting money. Marketing generates value by creating the connections between people and products, customers and companies.<\/p>\n<p>How does this happen? Boiled down to its essence, the <strong>role of marketing<\/strong> is to <em>identify, satisfy, and retain customers<\/em>.<\/p>\n<p>Before you can create anything of value, first you must <strong>identify<\/strong> a want or need that you can address, as well as the prospective customers who possess this\u00a0want or need.<\/p>\n<p>Next, you work to <strong>satisfy<\/strong> these customers by delivering\u00a0a product or service that addresses\u00a0these needs at the time customers\u00a0want it. Key to customer satisfaction is making sure everyone feels they benefit from the exchange. Your customer is happy with the value they get for what they pay. You are happy with the payment you receive in exchange for what you provide.<\/p>\n<p>Effective marketing doesn&#8217;t stop there. It also needs\u00a0to <strong>retain<\/strong> customers by creating new opportunities to win customer\u00a0loyalty and business.<\/p>\n<p><a href=\"https:\/\/s3-us-west-2.amazonaws.com\/courses-images-archive-read-only\/wp-content\/uploads\/sites\/903\/2015\/12\/23225733\/Role-of-Marketing-graphic-1.jpg\"><img loading=\"lazy\" decoding=\"async\" class=\"aligncenter wp-image-3310\" src=\"https:\/\/s3-us-west-2.amazonaws.com\/courses-images\/wp-content\/uploads\/sites\/143\/2016\/08\/16210724\/Role-of-Marketing-graphic-1-1024x884.jpg\" alt=\"Title: The Role of Marketing. Identify customers: understand customer wants and needs; identify who to target and how to reach them. Satisfy customers: Make the right product or service available to the right people at the right time. Retain customers: give customers a reason to keep coming back; find new opportunities to win their business.\" width=\"600\" height=\"518\" \/><\/a>As you will learn in this module, marketing encompasses a variety of activities focused on accomplishing these objectives. How companies approach and conduct day-to-day marketing activities varies widely. For many large, highly visible companies, such as Disney-ABC, Proctor &amp; Gamble, Sony, and Toyota, marketing represents a major expenditure. Such\u00a0companies rely on effective marketing for business success, and this dependence is reflected in their organizational strategies, budget, and operations. Conversely, for other organizations, particularly those in highly regulated or less competitive industries such as utilities, social services, medical care, or businesses providing one-of-a-kind products, marketing may be much less visible. It could even be as simple as a Web site or an informational brochure.<\/p>\n<p>There is no one model that guarantees marketing success. Effective marketing may be very expensive, or it may\u00a0cost next to nothing. What marketing must do in all cases is to help the organization identify, satisfy, and retain customers. Regardless of size or complexity, a marketing program is worth the costs only if it facilitates the organization&#8217;s ability to reach its goals.<\/p>\n<h2>How Companies Approach Marketing<\/h2>\n<p>When companies develop a marketing strategy, they make decisions about the direction\u00a0that the company and their marketing efforts will take. Companies can focus on the customer, product, sales, or production. As the business environment has changed over time, so has the way that companies focus their marketing efforts.<\/p>\n<h3>The Marketing Concept<\/h3>\n<p><em>An organization adopts the marketing concept when it takes steps to know as much about the consumer as possible, coupled with a decision to base marketing, product, and even strategy decisions on this information.<\/em> These organizations start with the customers\u2019 needs and work backward from there to create value, rather than starting with some other factor like production capacity or an innovative invention. They operate on the assumption that\u00a0success depends on\u00a0doing better than competitors at understanding, creating, delivering, and communicating value to\u00a0their target customers.<\/p>\n<h3>The Product Concept<\/h3>\n<p>Both historically and currently, many businesses do not follow the marketing concept. For many years, companies such as Texas Instruments and Otis Elevator have followed a <em>product orientation<\/em>, in which\u00a0the primary organizational focus is technology and innovation. All parts of these organizations invest heavily in building and showcasing impressive features and product advances, which are the areas in\u00a0which these companies prefer to compete. This approach is also known as the <em>product concept<\/em>. Rather than focusing on a deep understanding of customer needs, these companies assume that a technically superior or less expensive product will sell itself. While this approach can be very profitable, there is a high risk of losing touch with what customers actually want. This leaves product-oriented companies vulnerable to more customer-oriented competitors.<\/p>\n<h3>The Sales Concept<\/h3>\n<p>Other companies follow a <em>sales orientation<\/em>. These businesses emphasize the sales process and try to make it as effective as possible. While companies in any industry may adopt the sales concept, multilevel-marketing companies such as Herbalife and Amway generally fall into this category. Many business-to-business companies with dedicated sales teams also fit this profile. These organizations assume that a good salesperson with the right tools and incentives is capable of selling almost\u00a0anything. Sales and marketing techniques include aggressive sales methods, promotions, and other activities that support the sale. Often, this focus on the selling process may ignore the customer or view the customer as someone to be manipulated. These companies sell what they make, which isn&#8217;t necessarily\u00a0what customers want.<\/p>\n<h3>The Production Concept<\/h3>\n<div id=\"attachment_2506\" style=\"width: 261px\" class=\"wp-caption alignright\"><a href=\"https:\/\/s3-us-west-2.amazonaws.com\/courses-images-archive-read-only\/wp-content\/uploads\/sites\/903\/2015\/12\/23225605\/Ford_assembly_line_-_1913.jpg\"><img loading=\"lazy\" decoding=\"async\" aria-describedby=\"caption-attachment-2506\" class=\"wp-image-2506\" src=\"https:\/\/s3-us-west-2.amazonaws.com\/courses-images\/wp-content\/uploads\/sites\/143\/2016\/08\/16210740\/Ford_assembly_line_-_1913.jpg\" alt=\"An old photograph of people building hubcaps on an assembly line.\" width=\"251\" height=\"221\" \/><\/a><\/p>\n<p id=\"caption-attachment-2506\" class=\"wp-caption-text\">Ford assembly line, 1913, Highland Park, Michigan<\/p>\n<\/div>\n<p>The <em>production concept<\/em> is followed by\u00a0organizations that are striving for low-production costs, highly efficient processes, and mass distribution (which enables\u00a0them to deliver low-cost goods at the best price). This approach came into popularity during the Industrial Revolution of the late 1800s, when businesses were beginning to exploit opportunities associated with automation and mass production. Production-oriented companies\u00a0assume that customers care most about low-cost products being readily available and less about\u00a0specific product features. Henry Ford\u2019s success with the groundbreaking assembly-line\u2013built Model T is a classic example of the production concept in action. Today this approach is still widely successful in developing countries seeking economic gains in\u00a0the manufacturing sector.<\/p>\n<h3>Seeing the Whole Picture<\/h3>\n<p>Savvy\u00a0businesses acknowledge the importance of product features, production, and sales, but they also realize that in today&#8217;s business environment a marketing orientation will lead to the greatest success when businesses continuously collect information about customers\u2019 needs and competitors\u2019 capabilities; share the information across departments; and use the information to create a competitive advantage by increasing value for customers.<\/p>\n<h2>What Is Value?<\/h2>\n<p>Marketing exists to help organizations understand, reach, and deliver\u00a0value to\u00a0their customers.\u00a0In it&#8217;s simplest form, <strong>value<\/strong> is the\u00a0measure of the benefit gained from a product or service relative to\u00a0the full cost of the item.\u00a0In the process of the marketing exchange, value must be created.<\/p>\n<div class=\"textbox shaded\" style=\"text-align: center;\">Value = benefit &#8211; cost<\/div>\n<p>Let&#8217;s look at a\u00a0simple example: If you and I decide to give each other a $5 bill at the same moment, is value created? I hand my $5 bill to you, and you hand yours to me. It is hard to say that either of us receives a benefit greater than the $5 bill we just received. There is no value in the exchange.<\/p>\n<p>Now, imagine that you are passing by a machine that dispenses bus tickets. The machine is malfunctioning and will only accept $1 bills. The bus is about to arrive and a man in front of the machine asks if you would be willing to give him four <span style=\"color: #333333;\">$1 bills in exchange for a $5 bill. You could, of course, decide to make change for him (and give him five $1 bills), making this an &#8220;even exchange.&#8221; But let&#8217;s say you agree to his proposal of exchanging four $1 bills for a $5. In that moment a $1 bill is worth $1.25 to him. How does that make sense in the v<\/span>alue equation? From his perspective, the ability to use the bus ticket dispenser\u00a0<em>in that moment<\/em>\u00a0adds value in the transaction.<\/p>\n<p>Value is not simply a question of the financial costs and financial benefits. It includes perceptions of benefit that are different for every person. The marketer has to understand what is of greatest value to the target customer, and then use that information to develop a total\u00a0offering that <em>creates value<\/em>.<\/p>\n<h3>Value Is More Than Price<\/h3>\n<p>You will \u00a0notice that we did not express value as value = benefit &#8211; price. \u00a0Price plays an important role in defining value, but it&#8217;s not the only consideration. Let&#8217;s look at a few typical examples:<\/p>\n<ul>\n<li>Two products have exactly the same ingredients, but a customer selects the\u00a0higher-priced product because of the name brand<\/li>\n<\/ul>\n<p>For the marketer, this means that the brand is <em>adding value<\/em> in the transaction.<\/p>\n<ul>\n<li>A customer shopping online selects a\u00a0product but abandons the order before paying because there\u00a0are too many steps in the purchase process<\/li>\n<\/ul>\n<p>The inconvenience of filling in many forms, or concerns about providing personal information, can <em>add cost\u00a0<\/em>(which will subtract from the value the customer perceives).<\/p>\n<ul>\n<li>An individual who is interested in a political cause commits to attending a meeting, but cancels when he realizes that he doesn&#8217;t know anyone attending and that the meeting is on the other side of town.<\/li>\n<\/ul>\n<p>For this person, the\u00a0benefit of attending and participating is lower because of costs related to personal connection and convenience.<\/p>\n<p>As you saw in these examples, the process of determining the value of an offering and then aligning it with the wants and needs of a target customer is challenging. As you continue through this section, think about what <em>you<\/em> value and how that impacts the buying decisions you make every day.<\/p>\n<h3>Value in a Competitive Marketplace<\/h3>\n<p>As if understanding individual perceptions of value weren&#8217;t difficult enough, the presence of competitors further complicates perceptions of value. Customers instinctively make choices between competitive offerings based on <em>perceived value<\/em>.<\/p>\n<p><a href=\"https:\/\/s3-us-west-2.amazonaws.com\/courses-images-archive-read-only\/wp-content\/uploads\/sites\/903\/2015\/12\/23225540\/6174240463_b5dbf2d31c_o.jpg\"><img loading=\"lazy\" decoding=\"async\" class=\"wp-image-2370 alignright\" src=\"https:\/\/s3-us-west-2.amazonaws.com\/courses-images\/wp-content\/uploads\/sites\/143\/2016\/08\/16210834\/6174240463_b5dbf2d31c_o-1024x683.jpg\" alt=\"A view of the Seattle, Washington, skyline at dusk. The Seattle Space Needle is in the foreground.\" width=\"276\" height=\"184\" \/><\/a><\/p>\n<p>Imagine that you are traveling to Seattle, Washington, with a group of six\u00a0friends for a school event. You have the option to stay at a Marriott Courtyard Hotel that is located next to the event venue for $95 per night. If you pay the &#8220;additional person fee,&#8221; you could share the room with one friend for a cost of $50 per night. However, one of your friends finds an AirBnB listing for\u00a0an entire\u00a0apartment that sleeps six people. Cost: $280 per night. That takes the price down to $40 per night, but the apartment is\u00a0five miles away from the venue and, since there are seven of you, you would likely be sleeping on a couch or fighting for a bed. It has a more personal feel and a kitchen, but you will really be staying in someone else&#8217;s place with your friends. It&#8217;s an interesting dilemma. Regardless of which option you would really choose, consider the differences in the value of each and how the presence of both options generates unavoidable comparisons: the introduction of\u00a0the AirBnb alternative has the effect of highlighting new shortcomings and benefits of the\u00a0Marriott Courtyard hotel room.<\/p>\n<h3>Competition, Substitutes and Differentiation<\/h3>\n<p>Alternatives generally fall into two categories: competitors and substitutes. A <strong>competitor<\/strong> is providing the same offering but is accentuating different features and benefits. If, say, you are evaluating\u00a0a Marriott Courtyard hotel room vs.\u00a0a\u00a0Hilton Hampton Inn hotel room, then you are looking at\u00a0<em>competitive offerings<\/em>. Both offerings are hotel rooms provided by different companies. The service includes different features, and the price and location vary, the sum of\u00a0which creates\u00a0different perceptions of value for customers.<\/p>\n<p>AirBnb is a service that allows individuals to rent out their homes, apartments, or a single room. AirBnb does not offer hotel rooms; it offers an alternative to, or substitute<em>\u00a0<\/em>for, a hotel room.\u00a0<strong><em>Substitute offerings<\/em><\/strong> are viewed by the user as alternatives. The substitution is not a perfect replication of the offering, which means that it will provide different value to customers.<\/p>\n<p>Competitors and substitutes force the marketer to identify the aspects of the\u00a0offering that provide unique value vis-\u00e0-vis the alternatives. We refer to this as differentiation. <strong>Differentiation<\/strong> is simply the process of identifying and optimizing the elements of an offering that provide unique value to customers. Sometimes organizations refer to this process as competitive differentiation, since it is very focused on optimizing value in the context of the competitive landscape.<\/p>\n<p>Finally, organizations seek to create an advantage in the marketplace whereby an organization&#8217;s offerings provide greater value because of a unique strategy, asset, or approach that the firm uses that other cannot easily copy. This is a <strong>competitive advantage<\/strong>. The American Marketing Association defines competitive advantage as &#8220;as total offer, vis-\u00e0-vis relevant competition, that is more attractive to customers. It exists when the competencies of a firm permit the firm to outperform its competitors.&#8221; When a company can create greater value for customers than its competitors, it has a competitive advantage.<\/p>\n<h2 class=\"im_title im_editable im_block\">What Is a Value Proposition?<\/h2>\n<p>We have discussed the complexity of understanding customer perceptions of value. As the company seeks to understand and optimize the value of its offering, it also must communicate the core elements of value to potential customers. Marketers do this through a <strong>value proposition<\/strong>, defined as follows:<\/p>\n<blockquote><p>A business or marketing statement that summarizes why a consumer should buy a product or use a service. This statement should convince a potential consumer that one particular product or service will add more value or better solve a problem than other similar offerings.<a class=\"footnote\" title=\"http:\/\/www.investopedia.com\/terms\/v\/valueproposition.asp\" id=\"return-footnote-6254-1\" href=\"#footnote-6254-1\" aria-label=\"Footnote 1\"><sup class=\"footnote\">[1]<\/sup><\/a><\/p><\/blockquote>\n<div class=\"wp-nocaption wp-image-2382 alignleft\"><a href=\"https:\/\/s3-us-west-2.amazonaws.com\/courses-images-archive-read-only\/wp-content\/uploads\/sites\/903\/2015\/12\/23225544\/14086869112_3a3ae3c9b7_k-1.jpg\"><img loading=\"lazy\" decoding=\"async\" class=\"wp-image-2382 alignleft\" src=\"https:\/\/s3-us-west-2.amazonaws.com\/courses-images-archive-read-only\/wp-content\/uploads\/sites\/903\/2015\/12\/23225544\/14086869112_3a3ae3c9b7_k-1-683x1024.jpg\" alt=\"Photo of seven green apples surrounding one red apple.\" width=\"250\" height=\"375\" \/><\/a><\/div>\n<p>It is difficult to create an effective value proposition because it requires the marketer to distill many different elements of value and differentiation into one simple statement that can be easily read and understood. Despite the challenge, it is very important to create an effective value proposition.\u00a0The value proposition focuses marketing efforts on the unique benefit to customers. This helps focus the offering on the customer and, more specifically, on the unique value to the customer.\u00a0Also, the value proposition is a message, and the audience is the target customer. You want your value proposition to communicate, very succinctly, the promise of unique value in your\u00a0offering.<\/p>\n<p>A value proposition needs to very simply answer the question: Why should someone buy what you are offering?\u00a0If you look closely at this question it contains three components:<\/p>\n<ul>\n<li><strong>Who?\u00a0<\/strong>The value proposition does not name the target buyer, but it must show clear value to the target buyer.<\/li>\n<li><strong>What?<\/strong> The offering needs to be defined in the context of that buyer.<\/li>\n<li><strong>Why? <\/strong>It must show that the\u00a0offering is uniquely valuable to the buyer.<\/li>\n<\/ul>\n<h2>How Do You Create an\u00a0Effective Value Proposition?<\/h2>\n<p>When creating or evaluating a value proposition, it is helpful to step away from the long lists of features and benefits and deep competitive analysis. Stick to the simple, and strive for focus and clarity.\u00a0A value proposition should be clear, compelling, and differentiating<strong>.<\/strong><\/p>\n<ul>\n<li>Clear: short and direct; immediately identifies\u00a0both the offering and the value or benefit<\/li>\n<li>Compelling: conveys the benefit in a way that motivates the buyer to act<\/li>\n<li>Differentiating: sets the offering apart or differentiates it from other offerings<\/li>\n<\/ul>\n<h2>Marketing and Customer Relationships<\/h2>\n<h3>Why Customers Matter<\/h3>\n<p>Marketing exists to help organizations understand, reach, and deliver\u00a0value to\u00a0their customers. For this reason, the customer is considered the cornerstone of marketing.<\/p>\n<p>With this in mind, what is likely to happen when an organization\u00a0doesn\u2019t understand or pay attention to what its customers want? What if an organization doesn\u2019t even really understand who its customers\u00a0are?<\/p>\n<p>One of the world\u2019s best-known brands, Coca-Cola, provides a high-profile example of misunderstanding customer \u201cwants.\u201d \u00a0In the following video, Roberto Goizueta\u2014in his only on-camera interview on this topic\u2014recounts the disastrous launch of New Coke in 1985 and describes the lessons the company learned. Goizueta was chairman, director, and chief executive officer of the Coca-Cola Company from August 1980 until his death in October 1997.<\/p>\n<p><iframe loading=\"lazy\" id=\"oembed-1\" title=\"All About New Coke - from The Excellence Files\" width=\"500\" height=\"281\" src=\"https:\/\/www.youtube.com\/embed\/BmQs8g9ytRA?feature=oembed&#38;rel=0\" frameborder=\"0\" allowfullscreen=\"allowfullscreen\"><\/iframe><\/p>\n<h3>Customer Relationship Management: A Strategic Imperative<\/h3>\n<p>We have stated that the central purpose of marketing is to help organizations identify, satisfy, and retain their customers. These three activities lay the groundwork for what has become a strategic imperative in modern marketing: customer relationship management.<\/p>\n<p>To a student of marketing in the digital age, the idea of relationship building between customers and companies may seem obvious\u00a0and commonplace. It certainly is a\u00a0natural\u00a0outgrowth of the marketing concept, which orients entire organizations around understanding and addressing customer needs. But only in recent decades has technology made it possible for companies to capture and utilize information about their customers to such a great extent and in such meaningful ways. The Internet and digital social media have created new platforms for customers and product providers to find and communicate with\u00a0one\u00a0another. As a result, there are more tools now than ever before to help companies create, maintain, and manage customer relationships.<\/p>\n<h4>Maximizing Customer Lifetime Value<\/h4>\n<p>Central to these developments is the concept of customer lifetime value. Customer lifetime value predicts how much profit is associated with a customer during\u00a0the course of their lifetime relationship with a company.<span style=\"color: #000000;\"><a style=\"color: #000000;\" href=\"http:\/\/dictionary.cambridge.org\/us\/dictionary\/english\/customer-lifetime-value\"><a class=\"footnote\" title=\"http:\/\/dictionary.cambridge.org\/us\/dictionary\/english\/customer-lifetime-value\" id=\"return-footnote-6254-2\" href=\"#footnote-6254-2\" aria-label=\"Footnote 2\"><sup class=\"footnote\">[2]<\/sup><\/a><\/a><\/span>\u00a0One-time customers usually have a relatively low customer lifetime value, while frequent, loyal, repeat-customers typically have a high customer lifetime value.<\/p>\n<p>How do\u00a0companies develop strong, ongoing relationships with customers who are likely to have a high customer lifetime value? Through marketing, of course.<\/p>\n<p>Marketing applies a customer-oriented mindset and, through particular marketing activities, tries to make initial contact with customers and move them through various stages of the relationship\u2014all with the goal of increasing lifetime customer value. These activities are summarized in the table below.<\/p>\n<div>\n<table>\n<tbody>\n<tr>\n<td><strong>Relationship Stage<\/strong><\/td>\n<td><strong>Typical Marketing Activities<\/strong><\/td>\n<\/tr>\n<tr>\n<td>Meeting and Getting Acquainted<\/td>\n<td>\n<ul>\n<li style=\"font-weight: 400;\">Find desirable target customers, including those likely to deliver a high customer lifetime value<\/li>\n<li style=\"font-weight: 400;\">Understand what these customers want<\/li>\n<li style=\"font-weight: 400;\">Build awareness and demand for what you offer<\/li>\n<li style=\"font-weight: 400;\">Capture new business<\/li>\n<\/ul>\n<\/td>\n<\/tr>\n<tr>\n<td>Providing a Satisfying Experience<\/td>\n<td>\n<ul>\n<li style=\"font-weight: 400;\">Measure and improve customer satisfaction<\/li>\n<li style=\"font-weight: 400;\">Track how customers\u2019 needs and wants evolve<\/li>\n<li style=\"font-weight: 400;\">Develop customer confidence, trust, and goodwill<\/li>\n<li style=\"font-weight: 400;\">Demonstrate and communicate competitive advantage<\/li>\n<li style=\"font-weight: 400;\">Monitor and counter competitive forces<\/li>\n<\/ul>\n<\/td>\n<\/tr>\n<tr>\n<td>Sustain a Committed Relationship<\/td>\n<td>\n<ul>\n<li style=\"font-weight: 400;\">Convert contacts into loyal repeat customers, rather than one-time customers<\/li>\n<li style=\"font-weight: 400;\">Anticipate and respond to evolving needs<\/li>\n<li style=\"font-weight: 400;\">Deepen relationships, expand reach of and reliance on what you offer<\/li>\n<\/ul>\n<\/td>\n<\/tr>\n<\/tbody>\n<\/table>\n<\/div>\n<p>Another benefit of effective customer relationship management is that it reduces the cost of business and increases profitability. As a rule, winning a new customer\u2019s business takes significantly more time, effort, and marketing resources than it does\u00a0to renew or expand business with an existing customer.<\/p>\n<h3>Customer Relationship As Competitive Advantage<\/h3>\n<p><a href=\"https:\/\/s3-us-west-2.amazonaws.com\/courses-images-archive-read-only\/wp-content\/uploads\/sites\/903\/2015\/12\/23225607\/10147130996_e8bbc8d83e_b-2.jpg\"><img loading=\"lazy\" decoding=\"async\" class=\"alignright wp-image-2512\" src=\"https:\/\/s3-us-west-2.amazonaws.com\/courses-images\/wp-content\/uploads\/sites\/143\/2016\/08\/16210744\/10147130996_e8bbc8d83e_b-2-581x1024.jpg\" alt=\"A woman wearing a cocktail dress and heels.\" width=\"250\" height=\"441\" \/><\/a><\/p>\n<p>As the global marketplace provides more and more choices for consumers, relationships can become a primary driver of why a customer chooses one company over others (or chooses none at all). When customers feel satisfaction with and affinity for a specific company or product, it simplifies their buying choices.<\/p>\n<p>For example, why might a woman shopping for a cocktail dress choose to go to Nordstrom rather than Macy\u2019s or Dillard&#8217;s, or pick from an army of online stores? Possibly\u00a0because she prefers the selection of dresses at Nordstrom and the store&#8217;s atmosphere. It&#8217;s much more likely, though, that thanks to Nordstrom&#8217;s practices, this shopper\u00a0has a relationship with an attentive\u00a0sales associate who has helped her find great outfits and accessories in the past. She also knows about the store&#8217;s\u00a0customer-friendly return policy, which might come in handy if she needs to return something.<\/p>\n<p>A\u00a0company like Nordstrom delivers such satisfactory experiences that its customers return again and again. A consistently positive customer experience matures into a relationship in which the customer becomes increasingly receptive to the company and its products. Over time, the customer relationship gives Nordstrom\u00a0a competitive advantage over other traditional department stores and online retailers.<\/p>\n<h3>When Customers Become Your Best Marketing Tool<\/h3>\n<p>Customer testimonials and recommendations have always been powerful marketing tools. They often work to persuade new customers to give something a try. In today\u2019s digital media landscape there is unprecedented opportunity for companies to engage customers as credible\u00a0advocates. When organizations invest in building strong customer relationships, these activities become particularly fruitful.<\/p>\n<p>For example, service providers like restaurateurs, physical therapists, and dentists frequently ask regular patrons and patients to write reviews about their real-life experiences on popular recommendation sites like Yelp and Google+. Product providers do the same on sites like Amazon and CNET.com. Although companies risk getting a bad review, they usually gain more by harnessing the credible voices and authentic experiences of customers they have served. In this process they also gain invaluable feedback about what\u2019s working or not working for their customers. Using this input, they can retool their products or approach to better match what customers want and improve business over time.<\/p>\n<p><a href=\"https:\/\/s3-us-west-2.amazonaws.com\/courses-images-archive-read-only\/wp-content\/uploads\/sites\/903\/2015\/12\/23225608\/Por_Que_No__Taqueria_-_339_Photos_-_Mexican_-_Southeast_Portland_-_Portland__OR_-_Reviews_-_Menu_-_Yelp.jpg\"><img loading=\"lazy\" decoding=\"async\" class=\"wp-image-2515 aligncenter\" src=\"https:\/\/s3-us-west-2.amazonaws.com\/courses-images\/wp-content\/uploads\/sites\/143\/2016\/08\/16210747\/Por_Que_No__Taqueria_-_339_Photos_-_Mexican_-_Southeast_Portland_-_Portland__OR_-_Reviews_-_Menu_-_Yelp-1024x737.jpg\" alt=\"Por_Que_No__Taqueria_-_339_Photos_-_Mexican_-_Southeast_Portland_-_Portland__OR_-_Reviews_-_Menu_-_Yelp\" width=\"726\" height=\"522\" \/><\/a><\/p>\n<p>Additionally, smart marketers know that when people take a public stance on\u00a0a product or issue, they tend to become more committed to that position. Thus, customer relationship management can become a virtuous cycle. As customers have more exposure and positive interaction with a company and its products, they want to become more deeply engaged, and they are more likely to become vocal evangelists who share their opinions publicly. Customers become an active part of a marketing engine that generates new business and retains loyal customers for repeat business and increased customer lifetime value.<\/p>\n<h2>Influences on Consumer Decisions<\/h2>\n<p>While the decision-making process itself appears\u00a0quite standardized, no two people make a decision in exactly the same way. People have many beliefs and behavioral tendencies\u2014some controllable, some beyond our control. How all these factors interact with each other ensures that each of us is unique in our consumer actions and choices.<\/p>\n<p>Although it isn&#8217;t feasible for marketers to react to the complex, individual profiles of every single consumer, it is possible to identify factors that tend to influence most consumers in predictable ways.<\/p>\n<p>The factors that influence the consumer problem-solving process are many and complex. For example, as groups, men and women express very different needs and behaviors regarding personal-care products. Families with young children tend to make different dining-out choices than single and married people with no children. A\u00a0consumer with a lot of prior purchasing experience in a product category might approach the decision differently from someone with no experience. As marketers gain a better understanding of these influencing factors, they can draw more accurate conclusions about consumer behavior.<\/p>\n<p>We can group these influencing factors into four\u00a0sets, illustrated in the figure below:<\/p>\n<ul>\n<li><strong>Situational Factors<\/strong>\u00a0pertain to the consumer\u2019s level of involvement in a\u00a0buying task and the market offerings that are available<\/li>\n<li><strong>Personal Factors<\/strong> are individual\u00a0characteristics and traits such as age, life stage, economic situation, and personality<\/li>\n<li><strong>Psychological Factors<\/strong> relate to the consumer\u2019s motivation, learning,\u00a0socialization, attitudes, and beliefs<\/li>\n<li><strong>Social\u00a0Factors<\/strong> pertain to the influence of culture, social class, family, and reference groups<\/li>\n<\/ul>\n<p><a href=\"https:\/\/s3-us-west-2.amazonaws.com\/courses-images-archive-read-only\/wp-content\/uploads\/sites\/903\/2016\/01\/23230304\/Influencing-Consumer-Decision-final.jpg\" rel=\"attachment wp-att-5188\"><img loading=\"lazy\" decoding=\"async\" class=\"aligncenter wp-image-5188\" src=\"https:\/\/s3-us-west-2.amazonaws.com\/courses-images\/wp-content\/uploads\/sites\/143\/2016\/09\/21232446\/Influencing-Consumer-Decision-final-1024x651.jpg\" alt=\"Factors Influencing Consumer Decisions. Situational factors: buying task, marketing offerings. Personal factors: demographics, life stage, lifestyle, personality. Psychological factors: motivation, learning, attitude and beliefs. Social factors: culture\/subculture, social class, family, reference groups. The consumer decision-making process: 1, Need recognition. 2, Information searching and processing. 3, Identification and evaluation of alternatives. 4, purchase decision. 5, post-purchase behavior.\" width=\"775\" height=\"493\" \/><\/a><\/p>\n<h2>Buying-Process Stages<\/h2>\n<h3>The Consumer Decision Process<\/h3>\n<p>Figure 1,\u00a0below, outlines the process a consumer goes through in making a purchase decision. Once the process is started, a potential buyer can withdraw at any stage before making the actual purchase. This six-stage process represents the steps people undergo\u00a0when they make a conscious effort to learn about the options\u00a0and select a product\u2013the first time they purchase a product, for instance, or when buying high-priced, long-lasting items they don\u2019t purchase frequently. This is called <em>complex<\/em> <em>decision<\/em> <em>making<\/em>.<\/p>\n<div id=\"attachment_5208\" style=\"width: 535px\" class=\"wp-caption aligncenter\"><a href=\"https:\/\/s3-us-west-2.amazonaws.com\/courses-images-archive-read-only\/wp-content\/uploads\/sites\/903\/2016\/01\/23230311\/Consumer-Decisions-Process-Final.jpg\" rel=\"attachment wp-att-5208\"><img loading=\"lazy\" decoding=\"async\" aria-describedby=\"caption-attachment-5208\" class=\"wp-image-5208\" src=\"https:\/\/s3-us-west-2.amazonaws.com\/courses-images\/wp-content\/uploads\/sites\/143\/2016\/09\/21232440\/Consumer-Decisions-Process-Final-900x1024.jpg\" alt=\"The Consumer Decision-Making Process. For complex and simple decision making. Step 1, Need recognition. Step 2, Information searching and processing. Step 3, identification and evaluation of alternatives. Step 4, purchase decision. Step 5, Post-purchase behavior.\" width=\"525\" height=\"597\" \/><\/a><\/p>\n<p id=\"caption-attachment-5208\" class=\"wp-caption-text\">Figure 1<\/p>\n<\/div>\n<p>For many products, the purchasing behavior is routine: you notice a need and you satisfy that need according to your habit of repurchasing the same brand or the cheapest brand or the most convenient alternative, depending on your personal assessment of trade-offs and value. In these situations, you have learned from your past experiences what will best satisfy your need, so you can bypass the second and third stages of the process. This is called <em>simple decision making<\/em>. However, if something changes appreciably (price, product, availability, services), then you may re-enter the full decision process and consider alternative brands.<\/p>\n<p>The following section discusses each step of the consumer decision-making process.<\/p>\n<h4>Need Recognition<\/h4>\n<p>The first step of the consumer decision process is recognizing that there is a problem\u2013or unmet need\u2013and that this need warrants some action. Whether we act to resolve a particular problem depends upon two factors: (1) the magnitude of the difference between what we have and what we need, and (2) the importance of the problem. A man\u00a0may desire\u00a0a new Lexus\u00a0and own a five-year-old Ford Focus. The discrepancy may be fairly large but relatively unimportant compared to the other problems he faces. Conversely, a woman\u00a0may own a two-year-old car that is running well, but for various reasons she considers\u00a0it extremely important to purchase another car this year. Consumers\u00a0do not move on to the next step until they have confirmed that their specific needs are important enough to act on.<\/p>\n<h4>Information Search<\/h4>\n<p>After recognizing a need, the prospective consumer may seek information to help identify and evaluate alternative products, services, experiences, and outlets that will meet that need. Information may\u00a0come from any number of sources: family and friends, search engines, Yelp reviews, personal observation, <em>Consumer Reports<\/em>, salespeople, product samples, and so forth. Which sources are most important depends on the individual and the type of purchase he or she is\u00a0considering.<\/p>\n<p>The information-search process\u00a0can also identify new needs. As a tire shopper looks for information, she may decide that the tires are not the real problem, but instead she needs a new car. At this point, her newly perceived\u00a0need may trigger a new information search.<\/p>\n<h4>Evaluation of Alternatives<\/h4>\n<p>As a consumer finds and processes information about the problem she is trying to solve, she identifies the alternative products, services, and outlets that are viable options. The next step is to evaluate these alternatives and make a choice, assuming a choice is possible that meets the consumer\u2019s financial and psychological requirements. Evaluation criteria vary from consumer to consumer and from purchase to purchase, just as the needs and information sources vary. One consumer may consider price most important while another puts more weight on quality or convenience.<\/p>\n<div class=\"wp-nocaption wp-image-3528 alignright\"><a href=\"https:\/\/s3-us-west-2.amazonaws.com\/courses-images-archive-read-only\/wp-content\/uploads\/sites\/903\/2016\/01\/23225759\/2204542748_763da79d26_b.jpg\"><img loading=\"lazy\" decoding=\"async\" class=\"wp-image-3528 alignright\" src=\"https:\/\/s3-us-west-2.amazonaws.com\/courses-images\/wp-content\/uploads\/sites\/143\/2016\/09\/21232443\/2204542748_763da79d26_b-683x1024.jpg\" srcset=\"https:\/\/s3-us-west-2.amazonaws.com\/courses-images-archive-read-only\/wp-content\/uploads\/sites\/903\/2016\/01\/23225759\/2204542748_763da79d26_b-200x300.jpg 200w, https:\/\/s3-us-west-2.amazonaws.com\/courses-images-archive-read-only\/wp-content\/uploads\/sites\/903\/2016\/01\/23225759\/2204542748_763da79d26_b.jpg 683w, https:\/\/s3-us-west-2.amazonaws.com\/courses-images-archive-read-only\/wp-content\/uploads\/sites\/903\/2016\/01\/23225759\/2204542748_763da79d26_b-350x525.jpg 350w\" alt=\"Young man holding a green vacuum cleaner and smiling\" width=\"200\" height=\"300\" \/><\/a><\/div>\n<p>Consider a situation in which\u00a0you are buying a new vacuum cleaner. During your information search process, you identified five leading models in online reviews, as well as a set of evaluation criteria that are most important to you: \u00a01) price, 2) suction power, 3) warranty, 4) weight, 5) noise level, and 6) ease of using attachments. After visiting Sears and Home Depot to check out all the options in person, you\u2019re torn between two models you short-listed. Finally you make the agonizing choice, and the salesperson heads to the warehouse\u00a0to get one for you. He returns\u00a0with bad news: The vacuum cleaner is out of stock, but a new shipment is expected in three days. Strangely relieved, you take that as a sign to go for the other model, which happens to be in stock. Although convenience wasn\u2019t on your original list of selection criteria, you need the\u00a0vacuum cleaner before the party you\u2019re having\u00a0the next day. You pick\u00a0the number-two choice and never look back.<\/p>\n<h4>The Purchase Decision<\/h4>\n<p>After much searching and evaluating (or perhaps very little), consumers at some point have to decide whether they are going to buy. Anything marketers can do to simplify purchasing will be attractive to buyers. For example, in advertising, marketers might\u00a0suggest the best size of product for a particular use or the right wine to drink with a particular food. Sometimes several decision situations can be combined and marketed as one package. For example, travel agents often package travel tours, and stores that sell appliances try to sell them with add-on warranties.<\/p>\n<h4>Postpurchase Behavior<\/h4>\n<p>All the behavior determinants and the steps of the buying process up to this point take place before or during the time a purchase is made. However, a consumer\u2019s feelings and evaluations after the sale are also significant to a marketer, because they can influence repeat sales and what the customer tells others about the product or brand.<\/p>\n<p>Marketing is all about keeping the customer happy at every stage of the decision-making\u00a0process, including postpurchase. It is normal for\u00a0consumers to experience some postpurchase anxiety after any significant or nonroutine purchase. This anxiety reflects a phenomenon called <em>cognitive dissonance<\/em>. According to this theory, people strive for consistency among their cognitions (knowledge, attitudes, beliefs, and values). When there are inconsistencies, dissonance arises, which people try to eliminate.<\/p>\n<p>Marketers may take specific steps to reduce postpurchase dissonance. One obvious way is to help ensure delivery of a quality solution that will satisfy customers. Another step is to develop advertising and new-customer communications that\u00a0stress the many positive attributes or confirm the popularity of the product. Providing personal reinforcement has proven effective with big-ticket items such as automobiles and major appliances. Salespeople in these areas may send cards or even make personal calls in order to reassure customers about their purchase.<\/p>\n<h2>Check Your Understanding<\/h2>\n<p>Answer the question(s) below to see how well you understand the topics covered above. This short quiz does <strong>not<\/strong> count toward your grade in the class, and you can retake it an unlimited number of times.<\/p>\n<p>Use this quiz to check your understanding and decide whether to (1) study the previous section further or (2) move on to the next section.<\/p>\n<p>\t<iframe id=\"lumen_assessment_3050\" class=\"resizable\" src=\"https:\/\/assessments.lumenlearning.com\/assessments\/load?assessment_id=3050&#38;embed=1&#38;external_user_id=&#38;external_context_id=&#38;iframe_resize_id=lumen_assessment_3050\" frameborder=\"0\" style=\"border:none;width:100%;height:100%;min-height:400px;\"><br \/>\n\t<\/iframe><\/p>\n\n\t\t\t <section class=\"citations-section\" role=\"contentinfo\">\n\t\t\t <h3>Candela Citations<\/h3>\n\t\t\t\t\t <div>\n\t\t\t\t\t\t <div id=\"citation-list-6254\">\n\t\t\t\t\t\t\t <div class=\"licensing\"><div class=\"license-attribution-dropdown-subheading\">CC licensed content, Original<\/div><ul class=\"citation-list\"><li>What Is Marketing?, Marketing Creates Value for Customers. <strong>Authored by<\/strong>: Lumen Learning. <strong>License<\/strong>: <em><a target=\"_blank\" rel=\"license\" href=\"https:\/\/creativecommons.org\/licenses\/by\/4.0\/\">CC BY: Attribution<\/a><\/em><\/li><li>Revision and Adaptation. <strong>Authored by<\/strong>: Lumen Learning. <strong>License<\/strong>: <em><a target=\"_blank\" rel=\"license\" href=\"https:\/\/creativecommons.org\/licenses\/by\/4.0\/\">CC BY: Attribution<\/a><\/em><\/li><li>Value for the Customer. <strong>Authored by<\/strong>: Lumen Learning. <strong>License<\/strong>: <em><a target=\"_blank\" rel=\"license\" href=\"https:\/\/creativecommons.org\/licenses\/by\/4.0\/\">CC BY: Attribution<\/a><\/em><\/li><li>Marketing and Customer Relationships. <strong>Authored by<\/strong>: Lumen Learning. <strong>License<\/strong>: <em><a target=\"_blank\" rel=\"license\" href=\"https:\/\/creativecommons.org\/licenses\/by\/4.0\/\">CC BY: Attribution<\/a><\/em><\/li><li>Screen Shot of Yelp Review. <strong>Authored by<\/strong>: Lumen Learning. <strong>License<\/strong>: <em><a target=\"_blank\" rel=\"license\" href=\"https:\/\/creativecommons.org\/licenses\/by\/4.0\/\">CC BY: Attribution<\/a><\/em><\/li><li>Check Your Understanding. <strong>Authored by<\/strong>: Lumen Learning. <strong>License<\/strong>: <em><a target=\"_blank\" rel=\"license\" href=\"https:\/\/creativecommons.org\/licenses\/by\/4.0\/\">CC BY: Attribution<\/a><\/em><\/li><\/ul><div class=\"license-attribution-dropdown-subheading\">CC licensed content, Shared previously<\/div><ul class=\"citation-list\"><li>Chapter 1: Introducing Marketing, from Introducing Marketing. <strong>Authored by<\/strong>: John Burnett. <strong>Provided by<\/strong>: Global Text. <strong>Located at<\/strong>: <a target=\"_blank\" href=\"http:\/\/solr.bccampus.ca:8001\/bcc\/file\/ddbe3343-9796-4801-a0cb-7af7b02e3191\/1\/Core%20Concepts%20of%20Marketing.pdf\">http:\/\/solr.bccampus.ca:8001\/bcc\/file\/ddbe3343-9796-4801-a0cb-7af7b02e3191\/1\/Core%20Concepts%20of%20Marketing.pdf<\/a>. <strong>License<\/strong>: <em><a target=\"_blank\" rel=\"license\" href=\"https:\/\/creativecommons.org\/licenses\/by\/4.0\/\">CC BY: Attribution<\/a><\/em><\/li><li>20140929 Hong Kong Umbrella Revolution. <strong>Authored by<\/strong>: Pasu Au Yeung. <strong>Located at<\/strong>: <a target=\"_blank\" href=\"https:\/\/www.flickr.com\/photos\/studiokanu\/15433515476\/\">https:\/\/www.flickr.com\/photos\/studiokanu\/15433515476\/<\/a>. <strong>License<\/strong>: <em><a target=\"_blank\" rel=\"license\" href=\"https:\/\/creativecommons.org\/licenses\/by\/4.0\/\">CC BY: Attribution<\/a><\/em><\/li><li>Introducing Marketing, Chapter 1: Introducing Marketing. <strong>Authored by<\/strong>: John Burnett. <strong>Provided by<\/strong>: Global Text. <strong>Located at<\/strong>: <a target=\"_blank\" href=\"http:\/\/solr.bccampus.ca:8001\/bcc\/file\/ddbe3343-9796-4801-a0cb-7af7b02e3191\/1\/Core%20Concepts%20of%20Marketing.pdf\">http:\/\/solr.bccampus.ca:8001\/bcc\/file\/ddbe3343-9796-4801-a0cb-7af7b02e3191\/1\/Core%20Concepts%20of%20Marketing.pdf<\/a>. <strong>License<\/strong>: <em><a target=\"_blank\" rel=\"license\" href=\"https:\/\/creativecommons.org\/licenses\/by\/4.0\/\">CC BY: Attribution<\/a><\/em><\/li><li>Seattle Skyline. <strong>Authored by<\/strong>: Terrell Woods. <strong>Located at<\/strong>: <a target=\"_blank\" href=\"https:\/\/www.flickr.com\/photos\/terrellcwoods\/6174240463\/\">https:\/\/www.flickr.com\/photos\/terrellcwoods\/6174240463\/<\/a>. <strong>License<\/strong>: <em><a target=\"_blank\" rel=\"license\" href=\"https:\/\/creativecommons.org\/licenses\/by-nc-nd\/4.0\/\">CC BY-NC-ND: Attribution-NonCommercial-NoDerivatives <\/a><\/em><\/li><li>Chapter 4: Understanding Buyer Behavior, from Introducing Marketing. <strong>Authored by<\/strong>: John Burnett. <strong>Provided by<\/strong>: Global Text. <strong>Located at<\/strong>: <a target=\"_blank\" href=\"http:\/\/solr.bccampus.ca:8001\/bcc\/file\/ddbe3343-9796-4801-a0cb-7af7b02e3191\/1\/Core%20Concepts%20of%20Marketing.pdf\">http:\/\/solr.bccampus.ca:8001\/bcc\/file\/ddbe3343-9796-4801-a0cb-7af7b02e3191\/1\/Core%20Concepts%20of%20Marketing.pdf<\/a>. <strong>License<\/strong>: <em><a target=\"_blank\" rel=\"license\" href=\"https:\/\/creativecommons.org\/licenses\/by\/4.0\/\">CC BY: Attribution<\/a><\/em><\/li><\/ul><div class=\"license-attribution-dropdown-subheading\">All rights reserved content<\/div><ul class=\"citation-list\"><li>All About New Coke - from The Excellence Files. <strong>Provided by<\/strong>:   EnterpriseMediaVideo. <strong>Located at<\/strong>: <a target=\"_blank\" href=\"https:\/\/youtu.be\/BmQs8g9ytRA\">https:\/\/youtu.be\/BmQs8g9ytRA<\/a>. <strong>License<\/strong>: <em>All Rights Reserved<\/em>. <strong>License Terms<\/strong>: Standard YouTube license<\/li><\/ul><div class=\"license-attribution-dropdown-subheading\">Public domain content<\/div><ul class=\"citation-list\"><li>Ford Assembly Line. <strong>Provided by<\/strong>: Wikimedia. <strong>Located at<\/strong>: <a target=\"_blank\" href=\"https:\/\/commons.wikimedia.org\/wiki\/File:Ford_assembly_line_-_1913.jpg\">https:\/\/commons.wikimedia.org\/wiki\/File:Ford_assembly_line_-_1913.jpg<\/a>. <strong>License<\/strong>: <em><a target=\"_blank\" rel=\"license\" href=\"https:\/\/creativecommons.org\/about\/pdm\">Public Domain: No Known Copyright<\/a><\/em><\/li><\/ul><\/div>\n\t\t\t\t\t\t <\/div>\n\t\t\t\t\t <\/div>\n\t\t\t <\/section><hr class=\"before-footnotes clear\" \/><div class=\"footnotes\"><ol><li id=\"footnote-6254-1\">http:\/\/www.investopedia.com\/terms\/v\/valueproposition.asp <a href=\"#return-footnote-6254-1\" class=\"return-footnote\" aria-label=\"Return to footnote 1\">&crarr;<\/a><\/li><li id=\"footnote-6254-2\">http:\/\/dictionary.cambridge.org\/us\/dictionary\/english\/customer-lifetime-value <a href=\"#return-footnote-6254-2\" class=\"return-footnote\" aria-label=\"Return to footnote 2\">&crarr;<\/a><\/li><\/ol><\/div>","protected":false},"author":26,"menu_order":3,"template":"","meta":{"_candela_citation":"[{\"type\":\"original\",\"description\":\"What Is Marketing?, Marketing Creates Value for Customers\",\"author\":\"Lumen Learning\",\"organization\":\"\",\"url\":\"\",\"project\":\"\",\"license\":\"cc-by\",\"license_terms\":\"\"},{\"type\":\"cc\",\"description\":\"Chapter 1: Introducing Marketing, from Introducing Marketing\",\"author\":\"John Burnett\",\"organization\":\"Global Text\",\"url\":\"http:\/\/solr.bccampus.ca:8001\/bcc\/file\/ddbe3343-9796-4801-a0cb-7af7b02e3191\/1\/Core%20Concepts%20of%20Marketing.pdf\",\"project\":\"\",\"license\":\"cc-by\",\"license_terms\":\"\"},{\"type\":\"original\",\"description\":\"Revision and Adaptation\",\"author\":\"Lumen 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