Creating Customer Relationships and Value through Marketing

Creating Customer Relationships and Value through Marketing

 
LO 1-1Define marketing and identify the diverse factors that influence marketing actions. 100 WORDS
LO 1-2Explain how marketing discovers and satisfies consumer needs. 100 WORDS
LO 1-3Distinguish between marketing mix factors and environmental forces. 100 WORDS
LO 1-4Explain how organizations build strong customer relationships and customer value through marketing. 100 WORDS
LO 1-5Describe how today’s customer relationship era differs from prior eras. 100 WORDS

LAUNCHING A NEW BILLION-DOLLAR FOOD CATEGORY—IN JUST SEVEN YEARS!
Thousands of newly launched consumer products quietly fail every year. How could an entirely new food category skyrocket to success? The answer: Look at Chobani® Greek Yogurt!
In 2005, Turkish immigrant Hamdi Ulukaya opened his mail in New Berlin, New York, and saw an ad that said, “Fully equipped yogurt factory for sale.” He bought it, painted the walls, hired a yogurt master from Turkey, and turned his attention to the task of developing high-quality Greek yogurt. He named it Chobani, which means “shepherd” in Turkish.
Developing Chobani’s Unique Greek Yogurt
Hamdi Ulukaya is not fond of American-style yogurt. “It was full of sugar and preservatives, nothing like I had enjoyed growing up,” he says. “In Turkey we eat strained yogurt, which is rich and creamy, at every meal.” The straining process removes much of the liquid whey while leaving behind more protein than the unstrained American yogurts marketed by Yoplait and Dannon.
“I was very picky. It took us 18 months to get the recipe right. But in 2007, we had it. I knew I had only one shot, and it had to be perfect,” says Ulukaya.
Reaching Customers
From the very beginning, Ulukaya and team pushed for distribution in major grocery chains and in their main dairy cases, not confined to the specialty or health food sections of these chains or in smaller, niche stores. He was convinced that Americans would really like Greek yogurt if they tried it. Ulukaya’s conviction paid off. By 2009, Chobani could be found in the main dairy cases of chains like Stop & Shop, BJ’s, and Costco. And by 2013, Chobani Greek Yogurt was sold nationwide in the United States, the United Kingdom, and Australia.
Chobani had little money for traditional advertising at the start, so it relied on positive word of mouth, with one happy customer telling another about this new Chobani Greek Yogurt. In 2010, Chobani’s “CHOmobile” started to tour the country, handing out free samples from the van at events to encourage consumers to try Chobani’s Greek Yogurt for the first time. Perhaps the biggest breakthrough in gaining public awareness was its sponsorship of the 2012 and 2014 U.S. Olympic and Paralympic Teams. During the 2012 opening ceremonies, Chobani premiered its “Proudly with You” TV advertisement.

Page 3

 
Just over five years from launch, Chobani boasts nearly 800,000 Facebook fans. The company has created a YouTube channel that features “Just Add Good” recipes to show customers how to use its tasty products in meals and desserts. It also interacts with consumers through a half-dozen other social media sites such as Twitter and Instagram, acknowledging everyone who mentions the brand.4
To access this QR code link, see the instructions in the Preface.

QR 1-1
Chobani Ad
 
Page 4

 
Chobani Today
In 2010, Chobani introduced its Champions Greek Yogurt line of 3.5-ounce cups for kids as a good source of vitamin D and protein. To promote the Champions brand, in 2012 Chobani hired former two-time U.S. Olympian women’s softball pitcher—and mother—Jennie Finch as spokesperson for the first television commercial for Champions. Also in 2012, Chobani opened Chobani SoHo in a New York City neighborhood, a unique retail store featuring a collection of yogurt creations with original Chobani toppings.
For Chobani, 2013 was a banner year that included introducing several new product lines, which are described in the video case at the end of the chapter. Chobani also expanded its main product line by adding more flavors like coconut, banana, and key lime, which were suggested by customers.
So how successful has Chobani been? In 2013, Chobani, with sales of over $1 billion annually, held 20 percent of the entire U.S. yogurt market. Greek yogurt accounted for about 36 percent of all yogurt sales in the United States, and Chobani garnered a huge 39 percent share of this segment—ahead of both Yoplait’s Greek and Dannon’s Oikos brands.

 
Located in New York City, Chobani SoHo is the brand’s first-of-its-kind retail concept, serving yogurt creations with innovative toppings.

Chobani, Marketing, and You
Will Hamdi Ulukaya and his Chobani Greek Yogurt continue this fantastic success—especially with the recent appearance of competing Greek yogurts from Yoplait, Dannon, and PepsiCo? For Ulukaya, one key factor will be how well Chobani understands and uses marketing—the subject of this book.
WHAT IS MARKETING?
The good news is that you are already a marketing expert! You perform many marketing activities and make marketing-related decisions every day. For example, would you sell more LG 55-inch 3D OLED HD Smart TVs at $9,999 or $999 each? You answered $999, right? So your experience in shopping gives you some expertise in marketing. As a consumer, you’ve been involved in thousands of marketing decisions, but mostly on the buying and not the selling side. But to test your expertise, answer the “marketing expert” questions posed in Figure 1–1. You’ll find the answers within the next several pages.
The bad news is that good marketing isn’t always easy. That’s why every year thousands of new products fail in the marketplace and then quietly slide into oblivion.

 
Are you a marketing expert? If so, what would you pay for this cutting-edge TV?

Marketing and Your Career
Marketing affects all individuals, all organizations, all industries, and all countries. This book seeks to teach you marketing concepts, often by having you actually “do marketing”—by putting you in the shoes of a marketing manager facing actual marketing decisions. The book also shows marketing’s many applications and how it affects our lives. This knowledge should make you a better consumer and enable you to be a more informed citizen, and it may even help you in your career planning.

Page 5

 

FIGURE 1–1
The see-if-you’re-really-a-marketing-expert test.

 

Perhaps your future will involve doing sales and marketing for a large organization. Working for a well-known company—Apple, Ford, Facebook, or General Mills—can be personally satisfying and financially rewarding, and you may gain special respect from your friends.
Small businesses also offer marketing careers. Small businesses are the source of the majority of new U.S. jobs. So you might become your own boss by being an entrepreneur and starting your own business.

 
For time to think and write software code, the chief executive officer of the world’s largest social media company sometimes hides out at a restaurant near his Silicon Valley headquarters.

In February 2004, a 19-year-old college sophomore from Harvard University started his own small web service business from his dorm room. He billed it as “an online directory that connects people through social networks at colleges.” That student, of course, was Mark Zuckerberg. The success of the Facebook launch defies comprehension. Zuckerberg’s Thefacebook.com website signed up 900 Harvard students in the four days after it appeared in early 2004. By the second week, there were almost 5,000 members. Unlike Facebook, not every Internet start-up reaches over a billion users a few years after its launch. In fact, more than half of all new businesses fail within five years of their start-up.

LO 1-1Define marketing and identify the diverse factors that influence marketing actions.

Marketing: Delivering Benefits to the Organization, Its Stakeholders, and Society
The American Marketing Association represents marketing professionals. Combining its 2004 and 2007 definitions, “marketing is the activity for creating, communicating, delivering, and exchanging offerings that benefit its customers, the organization, its stakeholders, and society at large.”9 This definition shows that marketing is far more than simply advertising or personal selling. It stresses the need to deliver genuine benefits in the offerings of goods, services, and ideas marketed to customers. Also, note that the organization doing the marketing, the stakeholders affected (such as customers, employees, suppliers, and shareholders), and society should all benefit.
To serve both buyers and sellers, marketing seeks (1) to discover the needs and wants of prospective customers and (2) to satisfy them. These prospective customers include both individuals, buying for themselves and their households, and organizations, buying for their own use (such as manufacturers) or for resale (such as wholesalers and retailers). The key to achieving these two objectives is the idea of exchange, which is the trade of things of value between a buyer and a seller so that each is better off after the trade.

Page 6

 

FIGURE 1–2
A marketing department relates to many people, organizations, and forces. Note that the marketing department both shapes and is shaped by its relationship with these internal and external groups.

 

The Diverse Elements Influencing Marketing Actions
Although an organization’s marketing activity focuses on assessing and satisfying consumer needs, countless other people, groups, and forces interact to shape the nature of its actions (see Figure 1–2). Foremost is the organization itself, whose mission and objectives determine what business it is in and what goals it seeks. Within the organization, management is responsible for establishing these goals. The marketing department works closely with a network of other departments and employees to help provide the customer-satisfying products required for the organization to survive and prosper.
Figure 1–2 also shows the key people, groups, and forces outside the organization that influence its marketing activities. The marketing department is responsible for facilitating relationships, partnerships, and alliances with the organization’s customers, its shareholders (or often representatives of nonprofit organizations), its suppliers, and other organizations. Environmental forces involving social, economic, technological, competitive, and regulatory considerations also shape an organization’s marketing actions. Finally, an organization’s marketing decisions are affected by and, in turn, often have an important impact on society as a whole.
The organization must strike a balance among the sometimes differing interests of these groups. For example, it is not possible to simultaneously provide the lowest-priced and highest-quality products to customers and pay the highest prices to suppliers, the highest wages to employees, and the maximum dividends to shareholders.
What Is Needed for Marketing to Occur
For marketing to occur, at least four factors are required: (1) two or more parties (individuals or organizations) with unsatisfied needs, (2) a desire and ability on their part to have their needs satisfied, (3) a way for the parties to communicate, and (4) something to exchange.

Page 7

 
Two or More Parties with Unsatisfied Needs    Suppose you’ve developed an unmet need—a desire for a late-night dinner after studying for an exam—but you don’t yet know that Domino’s Pizza has a location in your area. Also unknown to you is that Domino’s recently introduced its tasty Handmade Pan Pizza, just waiting to be ordered, handmade, and delivered. This is an example of two parties with unmet needs: you, desiring a meal, and your local Domino’s Pizza owner, needing someone to buy a Handmade Pan Pizza.
Desire and Ability to Satisfy These Needs    Both you and the Domino’s Pizza owner want to satisfy these unmet needs. Furthermore, you have the money to buy the Domino’s Handmade Pan Pizza and the time to order it online or over the telephone. The Domino’s owner has not only the desire to sell its Handmade Pan Pizza but also the ability to do so since the pizza is easily made and delivered to (or picked up by) you.
A Way for the Parties to Communicate    The marketing transaction of purchasing a Domino’s Handmade Pan Pizza will never occur unless you know the product exists and its location (street/web address and/or phone number). Similarly, the Domino’s Pizza owner won’t sell the Handmade Pan Pizza unless there’s a market of potential buyers nearby. When you receive a coupon in the mail or drive by me Domino’s store location, this communication barrier between you (the buyer) and the Domino’s Pizza owner (the seller) is overcome.
Something to Exchange    Marketing occurs when the transaction takes place and both the buyer and seller exchange something of value. In this case, you exchange your money ($7.99) for the Domino’s Handmade Pan Pizza. Both you and the Domino’s Pizza owner have gained and also given up something, but you are both better off because each of you has satisfied the other’s unmet needs. You have the opportunity to eat a Domino’s Handmade Pan Pizza to satisfy your hunger, but you gave up some money to do so; the Domino’s Pizza owner gave up the Handmade Pan Pizza but received money, which will help the owner remain in business. The ethical and legal foundations of this exchange process are central to marketing and are discussed in Chapter 4.

 
Marketing doesn’t happen in a vacuum. The text describes the four factors needed to buy a product like a Domino’s Handmade Pan Pizza.
learning review
1-1.What is marketing?
1-2.Marketing focuses on_______and_______consumer needs.
1-3.What four factors are needed for marketing to occur?
LO 1-2Explain how marketing discovers and satisfies consumer needs.

HOW MARKETING DISCOVERS AND SATISFIES CONSUMER NEEDS
The importance of discovering and satisfying consumer needs in order to develop and offer successful products is so critical to understanding marketing that we look at each of these two steps in detail next. Let’s start by asking you to analyze the three products below.

Page 8

 
For these three products, identify (1) what benefits the product provides buyers and (2) what factors or “showstoppers” might doom the product in the marketplace. Answers are discussed in the text.

Discovering Consumer Needs
The first objective in marketing is discovering the needs of prospective customers. But these prospective customers may not always know or be able to describe what they need and want. When Apple built its first Apple II personal computer and started a new industry, consumers didn’t really know what the benefits would be and had to be educated about how to use personal computers. In contrast, Bell, a U.S. bicycle helmet maker, listened to its customers, collected hundreds of their ideas, and put several into its new products. This is where effective marketing research, the topic of Chapter 8, can help.
The Challenge: Meeting Consumer Needs with New Products
New-product experts generally estimate that up to 94 percent of the more than 40,000 new consumer products (food, beverage, health, beauty, and other household and pet products) introduced in the United States annually “don’t succeed in the long run.” Robert M. McMath, who has studied more than 110,000 of these new-product launches, has two key suggestions: (1) focus on what the customer benefit is, and (2) learn from past mistakes.13
The solution to preventing product failures seems embarrassingly obvious. First, find out what consumers need and want. Second, produce what they need and want, and don’t produce what they don’t need and want. The three products shown above illustrate just how difficult it is to achieve new-product success, a topic covered in more detail in Chapter 10.
Without reading further, think about the potential benefits to customers and possible “showstoppers”—factors that might doom the product—for each of the three products pictured. Some of the products may come out of your past, and others may be on your horizon. Here’s a quick analysis of the three products:
Dr. Care Toothpaste. After extensive research, Dr. Care family toothpaste in its aerosol container was introduced more than two decades ago. The vanilla-mint-flavored product’s benefits were advertised as being easy to use and sanitary. Pretend for a minute that you are five years old and left alone in the bathroom to brush your teeth using your Dr. Care toothpaste. Hmm! Apparently, surprised parents were not enthusiastic about the bathroom wall paintings sprayed by their future Rembrandts—a showstopper that doomed this creative product.14

QR 1-2
Terrafugia Transition Video
 

Terrafugia Transition. In 2014, Terrafugia plans to introduce the Transition® roadable aircraft, the world’s first combination personal airplane and car. The Transition’s flexibility allows it to land at most of the 5,200 general aviation airports in the United States. As a car, it can fold its wings, making it drivable on a roadway—from highways to residential streets! The Transition comes with a safety parachute and has a 23-gallon tank that can be filled at most gasoline stations. The proposed cost? About $279,000; you can reserve one for just a $10,000 deposit (see question 1, Figure 1–1). Potential showstoppers: The price and a potential buyer’s concern that a vehicle bumped in a fender bender on a road might not be something to fly around in.

QR 1-3
Pepsi Next Ad

Pepsi Next. In early 2012, PepsiCo launched a new cola brand—Pepsi Next. It is “tastefully” sweetened with a combination of high fructose corn sugar and three artificial sweeteners, resulting in a soft drink that has 60 calories—60 percent less than regular Pepsi-Cola. Pepsi Next will battle for market share in the mid-calorie segment of soft drinkers who want both taste and low calories. A potential showstopper: In the past, mid-calorie soft drinks Pepsi XL (1995), Pepsi Edge (2004), and Coca-Cola C2 (2004) all failed as “transition” sodas from regular to diet. Will Pepsi Next be next? As always, you’ll be the judge!

Page 9

 
Firms spend billions of dollars annually on marketing and technical research that significantly reduces, but doesn’t eliminate, new-product failure. So meeting the changing needs of consumers is a continuing challenge for firms around the world.
Consumer Needs and Consumer Wants    Should marketing try to satisfy consumer needs or consumer wants? Marketing tries to do both. Heated debates rage over this question, fueled by the definitions of needs and wants and the amount of freedom given to prospective customers to make their own buying decisions.
need occurs when a person feels deprived of basic necessities such as food, clothing, and shelter. A want is a need that is shaped by a person’s knowledge, culture, and personality. So if you feel hungry, you have developed a basic need and desire to eat something. Let’s say you then want to eat an apple or a Hot Pockets Bacon Cheddar Cheese Melt microwave sandwich because, based on your past experience, you know these will satisfy your hunger need. Effective marketing, in the form of creating an awareness of good products at convenient locations, can clearly shape a person’s wants.
Certainly, marketing tries to influence what we buy. A question then arises: At what point do we want government and society to step in to protect consumers? Most consumers would say they want government to protect us from harmful drugs and unsafe cars but not from candy bars and soft drinks. To protect college students, should government restrict their use of credit cards?17 Such questions have no clear-cut answers, which is why legal and ethical issues are central to marketing. Because even psychologists and economists still debate the exact meanings of need and want, we shall use the terms interchangeably throughout the book.

 
Studying late at night for an exam and being hungry, you decide to microwave a Hot Pockets Bacon Cheddar Cheese Melt sandwich. Is this a need or want? The text discusses the role of marketing in influencing decisions like this.

As shown in the left side of Figure 1–3 on the next page, discovering needs involves looking carefully at prospective customers, whether they are children buying M&Ms candy, college students buying Chobani Greek Yogurt, or firms buying Xerox color copiers. A principal activity of a firm’s marketing department is to scrutinize its consumers to understand what they need and want and the forces that shape those needs and wants.
What a Market Is    Potential consumers make up a market, which is people with both the desire and the ability to buy a specific offering. All markets ultimately are people. Even when we say a firm bought a Xerox copier, we mean one or several people in the firm decided to buy it. People who are aware of their unmet needs may have the desire to buy the product, but that alone isn’t sufficient. People must also have the ability to buy, such as the authority, time, and money. People may even “buy” an idea that results in an action, such as having their blood pressure checked annually or turning down their thermostat to save energy.

Page 10

 

FIGURE 1–3
Marketing seeks first to discover consumer needs through extensive research. It then seeks to satisfy those needs by successfully implementing a marketing program possessing the right combination of the marketing mix—the four Ps.

 

Satisfying Consumer Needs
Marketing doesn’t stop with the discovery of consumer needs. Because the organization obviously can’t satisfy all consumer needs, it must concentrate its efforts on certain needs of a specific group of potential consumers. This is the target market—one or more specific groups of potential consumers toward which an organization directs its marketing program.

LO 1-3Distinguish between marketing mix factors and environmental forces.

The Four Ps: Controllable Marketing Mix Factors    Having selected its target market consumers, the firm must take steps to satisfy their needs, as shown in the right side of Figure 1–3. Someone in the organization’s marketing department, often the marketing manager, must develop a complete marketing program to reach consumers by using a combination of four elements, often called “the four Ps”—a useful shorthand reference to them first published by Professor E. Jerome McCarthy:
Product. A good, service, or idea to satisfy the consumer’s needs.
Price. What is exchanged for the product.
Promotion. A means of communication between the seller and buyer.
Place. A means of getting the product to the consumer.
We’ll define each of the four Ps more carefully later in the book, but for now it’s important to remember that they are the elements of the marketing mix. These four elements are the controllable factors—product, price, promotion, and place—that can be used by the marketing manager to solve a marketing problem. For example, when a company puts a product on sale, it is changing one element of the marketing mix—namely, the price. The marketing mix elements are called controllable factors because they are under the control of the marketing department in an organization.
Designing an effective marketing mix also conveys to potential buyers a clear customer value proposition, which is a cluster of benefits that an organization promises customers to satisfy their needs. For example, Walmart’s customer value proposition can be described as “everyday low prices for a broad range of products that are always in stock in convenient locations.” Michelin’s customer value proposition can be summed up as “providing safety-conscious parents greater security in tires at a premium price.”
The Uncontrollable, Environmental Forces    While marketers can control their marketing mix factors, there are forces that are mostly beyond their control (see Figure 1–2). These are the environmental forces that affect a marketing decision, which consist of social, economic, technological, competitive, and regulatory forces. Examples are what consumers themselves want and need, changing technology, the state of the economy in terms of whether it is expanding or contracting, actions that competitors take, and government restrictions. Covered in detail in Chapter 3, these five forces may serve as accelerators or brakes on marketing, sometimes expanding an organization’s marketing opportunities and at other times restricting them.

Page 11

 
Traditionally, many marketing executives have treated these environmental forces as rigid, absolute constraints that are entirely outside their influence. However, recent studies and marketing successes have shown that a forward-looking, action-oriented firm can often affect some environmental forces by achieving technological or competitive breakthroughs, such as Apple’s iPhone and iPad.
THE MARKETING PROGRAM: HOW CUSTOMER RELATIONSHIPS ARE BUILT
An organization’s marketing program connects it with its customers. To clarify this link, we will first discuss the critically important concepts of customer value, customer relationships, and relationship marketing. Then we will illustrate these concepts using 3M’s marketing program for its new Post-it® Flag Highlighter products.

LO 1-4Explain how organizations build strong customer relationships and customer value through marketing.

Relationship Marketing: Easy to Understand, Hard to Do
Intense competition in today’s fast-paced global markets has prompted many successful U.S. firms to focus on “customer value.” Gaining loyal customers by providing unique value is the essence of successful marketing. What is new is a more careful attempt at understanding how a firm’s customers perceive value and then actually creating and delivering that value to them. Customer value is the unique combination of benefits received by targeted buyers that includes quality, convenience, on-time delivery, and both before-sale and after-sale service at a specific price. Firms now actually try to place a dollar value on the purchases of loyal, satisfied customers during their lifetimes. For example, loyal Kleenex customers average 6.7 boxes a year, about $994 over 60 years in today’s dollars (see question 2, Figure 1–1).

 
Target, Starbucks, and U.S. Bank provide customer value using three very different approaches. For their strategies, see the text.
Page 12

 
Research suggests that firms cannot succeed by being all things to all people. Instead, firms seek to build long-term relationships with customers by providing unique value to them. Many successful firms deliver outstanding customer value with one of three value strategies: best price, best product, or best service.
With the intense competition among U.S. businesses, being seen as “best” is admittedly difficult. Still, the three firms shown in the ads on the previous page have achieved great success as reflected in the mission, vision, and values statements they stress and live by:
•Best price: Target. It uses the Target brand promise of “Expect More, Pay Less®” to “make Target the preferred shopping destination for our guests by delivering outstanding value.”
•Best product: Starbucks. Starbucks seeks “to inspire and nurture the human spirit—one person, one cup and one neighborhood at a time,” stressing quality coffee and ethics in the process.
•Best service: U.S. Bank. The brand-line in the U.S. Bank ad—“All of US serving you®”—reinforces its commitment to best-in-class customer service, while providing a complete array of financial products and services.
Remaining among the “best” is a continuing challenge for today’s businesses.
A firm achieves meaningful customer relationships by creating connections with its customers through careful coordination of the product, its price, the way it’s promoted, and how it’s placed.
The hallmark of developing and maintaining effective customer relationships is today called relationship marketing, which links the organization to its individual customers, employees, suppliers, and other partners for their mutual long-term benefit. Relationship marketing involves a personal, ongoing relationship between the organization and its individual customers that begins before and continues after the sale.

 
Apple uses relationship marketing concepts with its iMac—tailoring the product to the taste of an individual customer and delivering it quickly.

Huge manufacturers find this rigorous standard of relationship marketing difficult to achieve. Today’s information technology, along with cutting-edge manufacturing and marketing processes, has led to tailoring products or services to the tastes of individual customers in high volumes at a relatively low cost. So you can place an Internet order for an Apple iMac and have it delivered in four or five days—in a configuration tailored to your unique wants. But with today’s Internet purchases, you will probably have difficulty achieving the same personal, tender-loving-care connection that you once had with your neighborhood computer store, bookstore, or other local retailer.
The Marketing Program and Market Segments
Effective relationship marketing strategies help marketing managers discover what prospective customers need and convert these ideas into marketable products (see Figure 1–3). These concepts must then be converted into a tangible marketing program—a plan that integrates the marketing mix to provide a good, service, or idea to prospective buyers. Ideally, they can be formed into market segments, which are relatively homogeneous groups of prospective buyers that (1) have common needs and (2) will respond similarly to a marketing action. This action might be a product feature, a promotion, or a price. As shown in Figure 1–3, in an effective organization this process is continuous: Consumer needs trigger product concepts that are translated into actual products that stimulate further discovery of consumer needs.

Page 13

 

learning review
1-4.An organization can’t satisfy the needs of all consumers, so it must focus on one or more subgroups, which are its__________.
1-5.What are the four marketing mix elements that make up the organization’s marketing program?
1-6.What are environmental forces?

3M’s Strategy and Marketing Program to Help Students Study
“How do college students really study?” asked David Windorski, a 3M inventor of Post-it® brand products, when thinking about adding a new item to the Post-it® line
To answer this question, Windorski worked with a team of four college students. Their task was to observe and question dozens of students about their study behavior, such as how they used their textbooks, took notes, wrote term papers, and reviewed for exams. Often, they watched students highlight a passage and then mark the page with a Post-it® Note or Post-it® Flag. Windorski realized he could pair an existing Post-it® product with a highlighter—merging the functions of two products into one to help students study!
Moving from Ideas to a Marketable Highlighter Product    After working on 15 or 20 wood and clay models, Windorski concluded he had to build a highlighter product that would dispense Post-it® Flags because the Post-it® Notes were simply too large to put inside the barrel of a highlighter.
Hundreds of the initial highlighter prototypes with Post-it® Flags inside were produced and given to students—and also office workers—to get their reactions. This research showed users wanted a convenient, reliable cover to protect the Post-it® Flags in the highlighter. So Windorski’s rotating cover for the Post-it® Flag Highlighter was born.

 
3M’s initial product line of Post-it® Flag Highlighters and Post-it® Flag Pens includes variations in color and line widths.

Adding the Post-it® Flag Pen    Most of David Windorski’s initial design energies had gone into his Post-it® Flag Highlighter research and development. But Windorski also considered other related products. Many people in offices need immediate access to Post-it® Flags while writing with pens. Students are a potential market for this product, too, but probably a smaller market segment than office workers.
A Marketing Program for the Post-it® Flag Highlighter and Pen    After several years of research, development, and production engineering, 3M introduced its new products. Figure 1–4 on the next page outlines the strategies for each of the four marketing mix elements in 3M’s program to market its Post-it® Flag Highlighters and Post-it® Flag Pens. Although similar, we can compare the marketing program for each of the two products:

QR 1-4
3M Post-it® Flag Highlighters Ad
 

Post-it® Flag Highlighter. The target market shown in the orange column in Figure 1–4 is mainly college students, so 3M’s initial challenge was to build student awareness of a product that they didn’t know existed. The company used a mix of print ads in college newspapers and a TV ad and then relied on word-of-mouth advertising—students telling their friends about how great the product is. Gaining distribution in college bookstores was also critical. Plus, 3M charged a price to distributors that it hoped would give a reasonable bookstore price to students and an acceptable profit to distributors and 3M.
Post-it® Flag Pen. The primary target market shown in the green column in Figure 1–4 is people working in offices. The Post-it® Flag Pens are mainly business products—bought by the purchasing department in an organization and stocked as office supplies for employees to use. So the marketing program for Post-it® Flag Pens emphasizes gaining distribution in outlets used by an organization’s purchasing department.

Page 14

 

FIGURE 1–4
Marketing programs for the launch of two Post-it® brand products targeted at two target market segments.

 

How well did these new 3M products do in the marketplace? They have done so well that 3M bestowed a prestigious award on David Windorski and his team. And in what must be considered any inventor’s dream come true, Oprah Winfrey flew Windorski to Chicago to appear on her TV show and thank him in person. She told Windorski and her audience that the Post-it® Flag Highlighter is changing the way she does things at home and at work—especially in going through potential books she might recommend for her book club. “David, I know you never thought this would happen when you were in your 3M lab … but I want you to take a bow before America for the invention of this … (highlighter). It’s the most incredible invention,” she said.

 
Welcome to the third generation of Post-it® Flag Highlighters: the 3-in-1 Post-it® Flag Pen and Highlighter. The cap contains the Post-it® flags.

Extending the Product Line    The success of these two products has also led Windorski to design a second generation of Post-it® Flag Highlighters and Pens without the rotating cover to make it easier to insert replacement flags. The new tapered design is also easier for students to hold and use.
The success of the second generation of Post-it® Flag Highlighters, in turn, has spawned a family of related products. One is a line of Post-it® Flag Pens with yellow, pink, or blue inks, available individually or in a three-pack.
Is it too much trouble when you’re studying to grab for a 3M Post-it® Flag, then a highlighter, and then your pen? You’re in luck! New to the family of 3M products is the latest generation of David Windorski’s innovations: A 3-in-1 combination that has a highlighter on one end, a pen on the other, and 3M Post-it® Flags in the removable cap, as shown in the photo. In addition, 3M recently introduced two more products to its Post-it® Flag Highlighter line: a Post-it Flag 1 Gel Pen and a Post-it® Flag 1 Permanent Marker. Each includes a comfortable grip, up to four different colors, and 50 flags.

Page 15

 
HOW MARKETING BECAME SO IMPORTANT
To understand why marketing is a driving force in the modern global economy, let us look at (1) the evolution of the market orientation, (2) ethics and social responsibility in marketing, and (3) the breadth and depth of marketing activities.

LO 1-5Describe how today’s customer relationship era differs from prior eras.

Evolution of the Market Orientation
Many American manufacturers have experienced four distinct stages in the life of their firms.28 The first stage, the production era, covers the early years of the United States up until the 1920s. Goods were scarce and buyers were willing to accept virtually any goods that were available and make do with them.29 In the sales era from the 1920s to the 1960s, manufacturers found they could produce more goods than buyers could consume. Competition grew. Firms hired more salespeople to find new buyers. This sales era continued into the 1960s for many American firms.
Starting in the late 1950s, marketing became the motivating force among many American firms and the marketing concept era dawned. The marketing concept is the idea that an organization should (1) strive to satisfy the needs of consumers while also (2) trying to achieve the organization’s goals. General Electric probably launched the marketing concept and its focus on consumers when its 1952 annual report stated: “The concept introduces … marketing … at the beginning rather than the end of the production cycle and integrates marketing into each phase of the business.”rriott, and Facebook have achieved great success by putting huge effort into implementing the marketing concept, giving their firms what has been called a market orientation. An organization that has a market orientation focuses its efforts on (1) continuously collecting information about customers’ needs, (2) sharing this information across departments, and (3) using it to create customer value.31 Today’s customer relationship era, the brown bar in Figure 1–5, started in the 1980s and occurs as firms continuously seek to satisfy the high expectations of customers.
A recent focus in the customer relationship era has been the advent of social networking, in which organizations and their customers develop relationships through social media websites such as Facebook, Twitter, and YouTube, among others. This focus has allowed organizations to understand and market to current and prospective customers in ways that are still evolving, such as in using social media.
An important outgrowth of this focus on the customer is the recent attention placed on customer relationship management (CRM), the process of identifying prospective buyers, understanding them intimately, and developing favorable long-term perceptions of the organization and its offerings so that buyers will choose them in the marketplace. This process requires the involvement and commitment of managers and employees throughout the organization and a growing application of information, communication, and Internet technology, as will be described throughout this book. Unfortunately, many expensive CRM computer systems have not provided the expected benefits because they failed to identify exactly which customer segments the company wanted to reach.

FIGURE 1–5
Four different orientations in the history of American business. Today’s customer relationship era focuses on satisfying the high expectations of customers.

 

Page 16

 

Fortune magazine recently named Trader Joe’s its “hottest retailer.” This reflects the company’s focus on providing a great customer experience, as described in the text.

The foundation of customer relationship management is really customer experience, which is the internal response that customers have to all aspects of an organization and its offering. This internal response includes both the direct and indirect contacts of the customer with the company. Direct contacts include the customer’s contacts with the seller through buying, using, and obtaining service. Indirect contacts most often involve unplanned “touches” with the company through word-of-mouth comments from other customers, reviewers, and news reports.
In terms of outstanding customer experience, Trader Joe’s is high on the list and was recently named “America’s hottest retailer” by Fortune magazine:
But Trader Joe’s is no ordinary grocery chain. It’s an offbeat, fun discovery zone that elevates food shopping from a chore to a cultural experience. It stocks its shelves with a winning combination of low-cost, yuppie-friendly staples (cage-free eggs and organic blue agave sweetener) and exotic, affordable luxuries—Belgian butter waffle cookies or Thai lime-and-chili cashews—that you simply can’t find anyplace else.34
Trader Joe’s has about 400 stores in over 30 states. It started in California and then expanded on the West Coast before jumping to the East Coast in 1996 and the Midwest in 2000.
What makes the customer experience and loyalty of shoppers at Trader Joe’s unique? The reasons include:
•Setting low prices, made possible by offering its own brands rather than well-known national ones.
•Offering unusual, affordable products not available from other retailers, like the Thai lime-and-chili cashews mentioned by Fortune magazine.
•Providing rare employee “engagement” to help customers, like actually walking them to where the roasted chestnuts are—rather than saying “aisle five.”

Page 17

 
This commitment to providing a real customer experience, rather than just paying lip service to it, is what gives Trader Joe’s its Fortune rating.
The disconnect between what companies think they are providing versus what customers say they are receiving shows how important customer experience is. In a recent survey of 362 companies, only 8 percent of customers described the experience they received as being “superior,” but 80 percent of the companies believed they were supplying a “superior” customer experience.

 
3M’s Scotch-Brite® Never RustTM soap pads—made from recycled plastic bottles—reflect the increasing concern among today’s organizations for society’s well-being.

Ethics and Social Responsibility in Marketing: Balancing the Interests of Different Groups
As organizations have changed their orientation, society’s expectations of marketers have also changed. Today, the standards of marketing practice have shifted from an emphasis on producers’ interests to consumers’ interests. Guidelines for ethical and socially responsible behavior can help managers balance consumer, organizational, and societal interests.
Ethics    Many marketing issues are not specifically addressed by existing laws and regulations. Should information about a firm’s customers be sold to other organizations? Should advertising by professional service providers, such as accountants and attorneys, be restricted? Should consumers be on their own to assess the safety of a product? These questions raise difficult ethical issues. Many companies, industries, and professional associations have developed codes of ethics to assist managers.
Social Responsibility    While many ethical issues involve only the buyer and seller, others involve society as a whole. For example, suppose you change the oil in your old Chevy yourself and dump the used oil in a corner of your backyard. Is this just a transaction between you and the oil manufacturer? Not quite! The used oil will contaminate the soil, so society will bear a portion of the cost of your behavior. This example illustrates the issue of social responsibility, the idea that organizations are accountable to a larger society.
The well-being of society at large should also be recognized in an organization’s marketing decisions. In fact, some marketing experts stress the societal marketing concept, the view that organizations should satisfy the needs of consumers in a way that provides for society’s well-being. For example, Scotch-Brite® Never RustTM soap pads from 3M—which are made from recycled plastic bottles—are more expensive than those offered by competitors (SOS and Brillo) but are superior because they don’t rust or scratch (see question 3, Figure 1–1).

 
Strategies in marketing art museums include planning new “satellite” museums like this one for the Louvre in Abu Dhabi …

The Breadth and Depth of Marketing
Marketing today affects every person and organization. To understand this, let’s analyze (1) who markets, (2) what is marketed, (3) who buys and uses what is marketed, (4) who benefits from these marketing activities, and (5) how consumers benefit.
Who Markets?    Every organization markets. It’s obvious that business firms involved in manufacturing (Heinz), retailing (Trader Joe’s), and providing services (Marriott) market their offerings. And nonprofit organizations such as your local hospital or college, places (cities, states, countries), and even special causes (Race for the Cure) also engage in marketing. Finally, individuals such as political candidates often use marketing to gain voter attention and preference.

Page 18

 
What Is Marketed?    Goods, services, and ideas are marketed. Goods are physical objects, such as toothpaste, cameras, or computers, that satisfy consumer needs. Services are intangible items such as airline trips, financial advice, or art museums. Ideas are thoughts about concepts, actions, or causes.
In this book, goods, services, and ideas are all considered “products” that are marketed. So a product is a good, service, or idea consisting of a bundle of tangible and intangible attributes that satisfies consumers’ needs and is received in exchange for money or something else of value.
Services like those offered by art museums, hospitals, and sports teams are relying more heavily on effective marketing. For example, financial pressures have caused art museums to innovate to market their unique services—the viewing of works of art by visitors—to increase revenues. This often involves levels of rare creativity unthinkable several decades ago.

 
… or taking a “virtual tour” of Russia’s State Hermitage Museum—courtesy of IBM.

This creativity ranges from establishing a global brand identity by launching overseas museums to offering sit-at-home video tours. France’s Louvre, home to the Mona Lisa painting, is developing a new satellite museum in Abu Dhabi housed in an architecturally space-age building.37 Russia’s world-class 1,000-room State Hermitage Museum wanted to find a way to market itself to potential first-time visitors. So it partnered with IBM to let you take a “virtual tour” of its exhibits while watching on your iPad and relaxing.
Ideas are most often marketed by nonprofit organizations or the government. So the Nature Conservancy markets the cause of protecting the environment. Charities market the idea that it’s worthwhile for you to donate your time or money. The Peace Corps markets to recruit qualified volunteers. And state governments in Arizona and Florida market taking a warm, sunny winter vacation in their states.

QR 1-5
Hermitage Tour Video
 

Who Buys and Uses What Is Marketed?    Both individuals and organizations buy and use products that are marketed. Ultimate consumers are the people—whether 80 years or eight months old—who use the products and services purchased for a household. In contrast, organizational buyers are those manufacturers, wholesalers, retailers, and government agencies that buy products and services for their own use or for resale. Although the terms consumersbuyers, and customers are sometimes used for both ultimate consumers and organizations, there is no consistency on this. In this book you will be able to tell from the example whether the buyers are ultimate consumers, organizations, or both.

 
Marketing the idea of volunteering for the Peace Corps can benefit society.

Who Benefits?    In our free-enterprise society, there are three specific groups that benefit from effective marketing: consumers who buy, organizations that sell, and society as a whole. True competition between products and services in the marketplace ensures that consumers can find value from the best products, the lowest prices, or exceptional service. Providing choices leads to the consumer satisfaction and quality of life that we expect from our economic system.
Organizations that provide need-satisfying products with effective marketing programs—for example, Target, IBM, and Avon—have blossomed. But competition creates problems for ineffective competitors, including the hundreds of dot-com businesses, such as Pets.com, that failed over a decade ago.

Page 19

 
Finally, effective marketing benefits society.38 It enhances competition, which both improves the quality of products and services and lowers their prices. This makes countries more competitive in world markets and provides jobs and a higher standard of living for their citizens.
How Do Consumers Benefit?    Marketing creates utility, the benefits or customer value received by users of the product. This utility is the result of the marketing exchange process and the way society benefits from marketing. There are four different utilities: form, place, time, and possession. The production of the product or service constitutes form utility. Place utility means having the offering available where consumers need it, whereas time utilitymeans having it available when needed. Possession utility is the value of making an item easy to purchase through the provision of credit cards or financial arrangements. Marketing creates its utilities by bridging space (place utility) and hours (time utility) to provide products (form utility) for consumers to own and use (possession utility).

learning review
1-7.What are the two key characteristics of the marketing concept?
1-8.What is the difference between ultimate consumers and organizational buyers?

LEARNING OBJECTIVES REVIEW
LO 1-1Define marketing and identify the diverse factors that influence marketing actions.
Marketing is an organizational function and a set of processes for creating, communicating, and delivering value to customers and for managing customer relationships in ways that benefit the organization and its stakeholders. This definition relates to two primary goals of marketing: (a) discovering the needs of prospective customers and (b) satisfying them. Achieving these two goals also involves the four marketing mix factors largely controlled by the organization and the five environmental forces that are generally outside its control.
LO 1-2Explain how marketing discovers and satisfies consumer needs.
The first objective in marketing is discovering the needs and wants of consumers who are prospective buyers and customers. This is not easy because consumers may not always know or be able to describe what they need and want. A need occurs when a person feels deprived of basic necessities such as food, clothing, and shelter. A want is a need that is shaped by a person’s knowledge, culture, and personality. Effective marketing can clearly shape a person’s wants and tries to influence what he or she buys. The second objective in marketing is satisfying the needs of targeted consumers. Because an organization obviously can’t satisfy all consumer needs, it must concentrate its efforts on certain needs of a specific group of potential consumers or target market—one or more specific groups of potential consumers toward which an organization directs its marketing program. It then selects its target market segment(s), which are relatively homogeneous groups of prospective buyers that (1) have common needs and (2) will respond similarly to a marketing action. Finally, the organization develops a set of marketing actions in the form of a unique marketing program to reach them.
LO 1-3Distinguish between marketing mix factors and environmental forces.
Four elements in a marketing program designed to satisfy customer needs are product, price, promotion, and place. These elements are called the marketing mix, the four Ps, or the marketer’s controllable variables. The marketing mix also provides a clear customer value proposition—a cluster of benefits that an offering satisfies. Environmental forces, also called uncontrollable variables, are largely beyond the organization’s control. These include social, economic, technological, competitive, and regulatory forces.
LO 1-4Explain how organizations build strong customer relationships and customer value through marketing.
The essence of successful marketing is to provide sufficient value to gain loyal, long-term customers. Customer value is the unique combination of benefits received by targeted buyers that usually includes quality, price, convenience, on-time delivery, and both before-sale and after-sale service. Marketers do this by using one of three value strategies: best price, best product, or best service.
LO 1-5Describe how today’s customer relationship era differs from prior eras.
U.S. business history is divided into four overlapping periods: the production era, the sales era, the marketing concept era, and the current customer relationship era. The production era covers the period up until the 1920s, when buyers were willing to accept virtually any goods that were available. The central notion was that products would sell themselves. The sales era lasted from the 1920s to the 1960s. Manufacturers found they could produce more goods than buyers could consume, and competition grew, so the solution was to hire more salespeople to find new buyers. In the late 1950s, the marketing concept era dawned when organizations adopted a strong market orientation and integrated marketing into each phase of their business. In today’s customer relationship era, organizations continuously seek to satisfy the high expectations of customers—an aggressive extension of the marketing concept era. This is increasingly done through social media.

Page 20

 
FOCUSING ON KEY TERMS
customer experience
customer relationship management (CRM)
customer value
customer value proposition
environmental forces
exchange
market
market orientation
market segments
marketing
marketing concept
marketing mix
marketing program
organizational buyers
product
relationship marketing
societal marketing concept
target market
ultimate consumers
utility
APPLYING MARKETING KNOWLEDGE
1What consumer wants (or benefits) are met by the following products or services? (a) 3M Post-it® Flag Highlighter, (b) Nike running shoes, (c) Hertz Rent-A-Car, and (d) television home shopping programs.
2Each of the four products, services, or programs in question 1 has substitutes. Respective examples are (a) a BicTM highlighter, (b) regular tennis shoes, (c) taking a bus, and (d) a department store. What consumer benefits might these substitutes have in each case that some consumers might value more highly than those mentioned in question 1?
3What are the characteristics (e.g., age, income, education) of the target market customers for the following products or services? (aNational Geographic magazine, (b) Chobani Greek Yogurt, (c) New York Giants football team, and (d) Facebook.
4A college in a metropolitan area wishes to increase its evening-school offerings of business-related courses such as marketing, accounting, finance, and management. Who are the target market customers (students) for these courses?
5What actions involving the four marketing mix elements might be used to reach the target market in question 4?
6What environmental forces (uncontrollable variables) must the college in question 4 consider in designing its marketing program?
7Does a firm have the right to “create” wants and try to persuade consumers to buy goods and services they didn’t know about earlier? What are examples of “good” and “bad” want creation? Who should decide what is good and what is bad?
BUILDING YOUR MARKETING PLAN
If your instructor assigns a marketing plan for your class, don’t make a face and complain about the work—for two special reasons. First, you will get insights into trying to actually “do marketing” that often go beyond what you can get by simply reading the textbook. Second, thousands of graduating students every year get their first job by showing prospective employers a “portfolio” of samples of their written work from college—often a marketing plan if they have one. This can work for you.
This “Building Your Marketing Plan” section at the end of each chapter suggests ways to improve and focus your marketing plan. You will use the sample marketing plan in Appendix A (following Chapter 2) as a guide, and this section after each chapter will help you apply those Appendix A ideas to your own marketing plan.
The first step in writing a good marketing plan is to have a business or product that enthuses you and for which you can get detailed information, so you can avoid glittering generalities. We offer these additional bits of advice in selecting a topic:
Do pick a topic that has personal interest for you—a family business; a business, product, or service you or a friend might want to launch; or a student organization that needs marketing help.
Do not pick a topic that is so large it can’t be covered adequately or so abstract it will lack specifics.

Page 21

 
1Now to get you started on your marketing plan, list four or five possible topics and compare these with the criteria your instructor suggests and those shown above. Think hard, because your decision will be with you all term and may influence the quality of the resulting marketing plan you show to a prospective employer.
2When you have selected your marketing plan topic, whether the plan is for an actual business, a possible business, or a student organization, write the “company description” in your plan, as shown in Appendix A (following Chapter 2).
 
VIDEO CASE 1

Chobani®: Making Greek Yogurt a Household Name

QR 1-6
Chobani Video Case
 

“Everybody should be able to enjoy a pure, simple cup of yogurt. And that’s what Chobani is,” says Hamdi Ulukaya, founder and chief executive officer of Chobani, Inc., in summarizing his vision for the company.
As the winner of the 2013 Ernst & Young World Entrepreneur of the Year award, his words and success story carry great credibility.
THE IDEA
Hamdi Ulukaya came to the United States in 1994 to learn English and study business. He started a feta cheese company, Euphrates, when his visiting father complained about the quality of American feta cheese. In 2005, Kraft Foods closed its New Berlin, New York, yogurt plant built in 1885. While tidying up his office, Ulukaya stumbled upon a postcard about the sale of the shuttered Kraft plant and threw it out. After sleeping on the decision, he fished it out of the wastebasket, visited the plant, and purchased it with the help of a United States Small Business Administration loan.
Ulukaya (at right in photo) had no real experience in the yogurt business. He grew up milking sheep at his family’s dairy in eastern Turkey and eating the thick, tangy yogurt of his homeland. Describing the regular yogurt he found on shelves in America, he has one comment: “Terrible!” In his view, it is too thin, too sweet, and too fake. So he decided to produce what is known as “Greek yogurt”—an authentic strained version that produces a thick texture, high protein content, and with little or no fat. With the help of four former Kraft employees and yogurt master Mustafa Dogan, (at left in photo), Ulukaya worked 18 months to perfect the recipe for Chobani Greek Yogurt.
The very first cup for sale of Ulukaya’s Greek yogurt appeared on shelves of a small grocer on Long Island, New York, in 2007. The new-product launch focused on the classic “4Ps” elements of marketing mix actions: product, price, place, and promotion.
 
PRODUCT STRATEGY
From the start Ulukaya’s Greek yogurt carried the brand name “Chobani.” There was no room for error, and the product strategy for the Chobani brand focused on the separate elements of (1) the product itself and (2) its packaging.
The Chobani product strategy stresses its authentic straining process that removes excess liquid whey. This results in a thicker, creamier yogurt that yields 13 to 18 grams of protein per single-serve cup, depending on the flavor. Chobani is free of ingredients like milk protein concentrate and animal-based thickeners, which some manufacturers add to make “Greek-style” yogurts.
Chobani uses three pounds of milk to make one pound of Chobani Greek Yogurt. Some other features that make Chobani Greek Yogurt “nothing but good,” to quote its tagline:
•Higher in protein than regular yogurt.
•Made with real fruit and only natural ingredients.
•Preservative-free.
•No artificial flavors or artificial sweeteners.
•Contains five live and active cultures, including three probiotics.

Page 22

Then, and still today, Ulukaya obsesses about Chobani’s packaging of the original cups. In 2007, Ulukaya concluded that not any cup would do. He insisted on a European-style cup with a circular opening exactly 95 millimeters across. This made for a shorter, wider cup that was more visible on retailer’s shelves. Also, instead of painted-on labels, Ulukaya chose shrink-on plastic sleeves that adhere to the cup and offer eye-popping colors.
“With our packaging people would say, ‘You’re making it all look different and why are you doing that?’ ” says Kyle O’Brien, executive vice president of sales. “If people pay attention to our cups—bright colors and all—we know we have won them, because what’s inside the cup is different from anything else on the shelf.”
PRICE STRATEGY
To keep control of their product, Ulukaya and O’Brien approached retailers directly rather than going through distributors. Prices were set high enough to recover Chobani’s costs and give reasonable margins to retailers but not so high that future rivals could undercut its price. Today, prices remain at about $1.29 for a single-serve cup.
PLACE STRATEGY
The decision of Ulukaya and O’Brien to get Chobani Greek Yogurt into the conventional yogurt aisle of traditional supermarkets—not on specialty shelves or in health food stores—proved to be sheer genius. Today Chobani sees its Greek Yogurt widely distributed in both conventional and mass supermarkets, club stores, and natural food stores. On the horizon: growing distribution in convenience and drug stores, as well as schools. Chobani is also focused on educating food service directors at schools across the United States about Greek yogurt’s health benefits for schoolkids.
The Chobani growth staggers imagination. From the company’s first order of 200 cases in 2007, its 2013 sales have grown to over 2 million cases per week. To increase capacity and bring new products to market faster, in 2012 Chobani opened a nearly one million square foot plant in Idaho. Built in just 326 days, it is the largest yogurt manufacturing facility in the world.
Along the way Chobani faced a strange glitch: Demand for Chobani’s Greek yogurt far surpassed supply, leading to unhappy retailers with no Chobani cups to sell. Kyle O’Brien launched Operation Bear Hug. “Instead of hiding behind letters to retailers, we decided to get on a plane and to communicate with them within 24 hours about the problem and what we proposed to do about it,” says O’Brien. “So we found it critical to be very transparent and open with our communication at times like that.”
 
PROMOTION STRATEGY
In its early years Chobani had no money for traditional advertising, so it relied on word-of-mouth recommendation from enthusiastic customers. The brand harnessed consumer passion on social media channels early on and found that people loved the taste of Chobani once they tried it. So in 2010, Chobani kicked off its CHOmobile tour: a mobile vehicle sampling Chobani at events across the country, encouraging consumers to taste Greek yogurt for the first time. As Chobani grew, it began to launch new promotional activities tied to (1) traditional advertising, (2) social media, and (3) direct communication with customers.
In 2011, Chobani launched its first national advertising campaign, “Real Love Stories.” The only problem: apparently it was too successful! The resulting additional consumer demand for Chobani Greek Yogurt exceeded its production capacity, leaving retailers unhappy because of complaining consumers. What did Chobani do then? It stopped the advertising campaign and sent in another Operation Bear Hug team to communicate with retailers. Since then it has run other successful national advertising campaigns, including sponsorship of the 2012 and 2014 U.S. Olympic Teams.
“Social media has been important to Chobani, which has embraced a high-touch model that emphasizes positive communication with its customers,” says Sujean Lee, head of corporate affairs. Today, Chobani’s Customer Loyalty Team receives about 7,000 inbound customer e-mails and phone calls a month and are able to make return phone calls to most of them. Consumers also get a handwritten note. Chobani launched its “Go Real Chobani” campaign in 2013 to highlight that they are a real company making real products and engaging consumers through real conversations.

Page 23

Aside from Facebook (www.Facebook.com/Chobani), the company interacts with its consumers through Twitter, Pinterest, Instagram, Foursquare, and other social media platforms. Chobani Kitchen (www.chobanikitchen.com) is an online resource with recipes, videos, and tips on how to use its Greek yogurt in favorite recipes.
AGGRESSIVE INNOVATION AND POSITIVE SOCIAL CHANGE
Dannon, Yoplait, and PepsiCo were shocked by the success of Chobani Greek Yogurt. Each now offers its own competing Greek yogurt. With giant competitors like these, what can Chobani do? Chobani’s focus: Innovate! And with creative, new Greek yogurt products!
“Today we offer our Chobani Greek Yogurt in single-serve and multi-serve sizes, while expanding our authentic strained Greek yogurt to new occasions and forms.” says Joshua Dean, vice-president of brand advertising. Its recent new-product offerings include:
•Chobani Bite®—3.5-ounce 4-packs to reach the new “indulgent” segment of Chobani customers—those wanting a healthy afternoon or evening snack. Sample flavor: Raspberry with Dark Chocolate Chips.
•Chobani Champions® Tubes—made for kids, the 2.25-ounce tubes offer low-fat, blended Chobani flavors with fruit in grab-and-go packaging. Sample flavor: Jammin’ Strawberry.
•Chobani FlipTM (photo above)—a 5.3-ounce, two-compartment package that lets consumers bend or “flip” mix-ins like granola or hazelnuts into the Chobani Greek Yogurt compartment. Sample flavor: Almond Coco Loco, a coconut low-fat yogurt paired with dark chocolate and sliced toasted almonds.
Chobani gives 10 percent of all profits to its Shepherd’s Gift Foundation to support people and organizations working for positive, long-lasting change. The name comes from the “spirit of a shepherd,” an expression in Turkey used to describe people who give without expecting anything in return. To date the foundation has supported over 50 projects—from local ones to international famine relief efforts.
WHERE TO NOW?
International operations and a unique test-market boutique in New York City give a peek at Chobani’s future.
International markets provide a growth opportunity. Already sold internationally in Australia, Chobani opened its international headquarters office in 2013. Other countries have far greater annual per capita consumption than that for U.S. consumers. For example, some Europeans eat five or six times as much on average. So while entrenched competitors exist in many foreign countries, the markets are often huge, too.
How do you test ideas for new Greek yogurt flavors? In Chobani’s case, it opened what it calls a “first-of-its-kind Mediterranean yogurt bar”—called Chobani SoHo—in a trendy New York City neighborhood. Here, customers can try new yogurt creations—from Strawberry + Granola to Toasted Coconut + Pineapple. The Chobani marketing team obtains consumer feedback at Chobani SoHo, leading to potential new flavors or products in the future.
 
Hmmm! Ready to schedule a visit to New York City and Chobani SoHo? And then sample a creation made with Pistachio + Chocolate (plain Chobani topped with pistachios, dark chocolate, honey, oranges, and fresh mint leaves), and perhaps influence what Chobani customers will be buying in the future?
Questions
1.From the information about Chobani in the case and at the start of the chapter, (a) whom did Hamdi Ulukaya identify as the target for his first cups of Greek yogurt and (b) what was his initial “4Ps” marketing strategy?
2.(a) What marketing actions would you expect the companies selling Yoplait, Dannon, and PepsiCo yogurts to take in response to Chobani’s appearance and (b) how might Chobani respond?
3.What are (a) the advantages and (b) the disadvantages of Chobani’s Customer Loyalty Team that handles communication with customers—from phone calls and e-mails to Facebook and Twitter messages?
4.As Chobani seeks to build its brand, it opened a unique retail store in New York City: Chobani SoHo. Why did Chobani do this?
5.(a) What criteria might Chobani use when it seeks markets in new countries and (b) what three or four countries meet these criteria?

 

"Is this question part of your assignment? We Can Help!"