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PRINCIPLES OF MARKETING

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Authentic marketing is not the art of

selling what you make but knowing what

to make. It is the art of identifying and

understanding customer needs and

creating solutions that deliver satisfaction

to the customers, profits to the producers

and benefits for the stakeholders.

- Philip Kotler

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MARKETING: MANAGING PROFITABLE CUSTOMER

RELATIONSHIP

Chapter 1

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Objectives Defined marketing, and marketing process. Examine five core customer and marketplace

concepts. Identify the elements of a customer-driven

marketing strategy and discuss the marketing management orientations.

Discuss customer relationship management and creating value for and capturing value from customers

Describe the major trends and forces changing the marketing landscape

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What is Marketing The simplest definition of marketing is :

“ managing profitable customer relationship”

The two main goals of marketing is:

1. Attract new customer by promising superior value

2. To keep and grow current customer by delivering satisfaction.

The key is delivering your promise

Wal-Mart “Always low price Always”

AT&T “it’s within your reach”

Dell “be direct”

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Marketing Defined Kotler’s definition:“Marketing is a social and managerial process by which

individuals and groups obtain what they need and want through creating and exchanging value with others”

Marketing definition in the scope of business:The process by which companies create value for

customers and build a strong customer relationship in order to capture value from customer in return.

In the sense of satisfying customer needs, Marketers should understand consumer needs, develops

products that provide superior value, and price, distributes, and promotes them effectively.

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The Marketing Process

Understanding the marke

t place and

customer

needs and

wants

Design a

customer-

driven marke

ting strate

gy

Construct

marketing

program that delive

r superi

or value

Build profita

ble relationship and

create customer

delight

Capture

value from the

customers

to create profits

Create value for the customer and build customer relationship

Capture value from customer

in return

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Understanding the market plac

e and customer

needs

and wants

Design a customer-

driven marketing strategy

Construct marketing program

that deliver

superior value

Build profitable relationshi

p and create

customer delight

Capture value from

the customers to create profits

The Marketing Process

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Marketing Core Concepts:

Customer needs,

wants, and demands

Market offerings- products, services,

and experiences

Customer value and

satisfaction

Exchange and

relationship

Markets

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Maslow’s Hierarchy of Needs

Self- actualizationPersonal growthand fulfillment

Esteem needsSelf-esteem, confidence, achievement, respect of others, respect by others

Social needsBelonging, and love needsFamily, friends, affection, relationships

Safety needsProtection, security, order, law, limits, stability, etc

Physiological needsBreathing, food, water, sleep

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Needs, Wants, and Demand Needs

The state of deprivation

○ Example: Food

Wants

The form human needs take as shaped by culture and

individual personality

○ Example: Want a big Mac

Demands

Human wants that are backed by buying power

To understand customer needs wants and demands

marketers conduct consumer research and analyze

customer data

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Discover Needs

Influence Wants

Manage Demands

Marketers

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Market offerings Customers’ needs and wants are fulfilled through a

market offering

Marketing offering are “Some combination of products, services, information, or experiences offered to a market to satisfy a need or want."

Marketing offers are not limited to physical products, it includes services, activities, or benefits offered for sale that are intangible and do not result in the owner ship of anything“ Example: banking, airline, hotel…”.

Market offers It also includes other entities, such as persons, place, organization, information, and ideas.

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Market Offers Marketing myopia

“the mistake of paying more attention to the specific product a company offers then to the benefits and experiences produced by these products” (the drill)

Marketers shouldn’t focus only on existing wants and lose sight of underlying customer needs … … … … …... they should create brand meaning and brand experiences (Example: Coca-Cola, Nike)

The product is only a tool to solve a consumer problem.

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Customer Value and Satisfaction

Customer form expectations about the value of various marketing offers and buy accordingly.

How do buyers form there expectations?

Past buying experience.

The opinions of friends.

market and competitor information and promises

Customer satisfaction depend on how well the product’s performance lives up to the customer’s expectations.

Marketers must be careful to set the right level of expectation.

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Exchanges and Relationship

The act of obtaining a desired object from someone by offering something in return

The marketer tries to bring about a response to some market offering. The response may be more then buying (example: political candidate wants votes, orchestra wants an audience, and a social action group wants idea acceptance)

One exchange is not the goal, relationships with several exchanges are the goal

Relationships are built through delivering value and satisfaction

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Markets The Market is:

“ The set of actual and potential buyers of a product or service, who share a particular need or want.”

Marketers should work to:

understand the needs and wants of specific markets.

Select the market they can serve best.

Developing products and services to satisfy customers in this market.

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Markets

Markets: Marketers often use the term markets to cover

various grouping of customers.Need markets (the diet-seeking market)Product markets (shoe market)Demographic markets (the youth market)Geographic markets (the French market)

They view sellers as constituting the industry and the buyers as constituting the market

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Marketing Means Managing Markets To Bring About Profitable Customer Relationship

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Elements Of A Modern Marketing System

Marketing involves serving a

market of final consumer in

the face of competitors

Each party in the system

adds value for the next level

All the arrows represent

relationship that must be

developed and managed,

thus a company’s success at

building profitable relationship

depends not only on its own

action but also on how well

the entire system serves the

needs of final consumer

All the actors in the system

are affected by major

environmental forces

Suppliers Marketing intermedia

ries

Final users

Company (marketer)

Competitors

Major environmental forces

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The Marketing Process

Understanding the market

place and customer needs and

wants

Design a

customer-

driven marke

ting strate

gy

Construct marketing program

that deliver superior value

Build profitable

relationship and create customer delight

Capture value from

the customers to create profits

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Designing a Customer-Driven Marketing Strategy

Marketing management

“is the art and science of choosing target markets and building profitable relationships with them.”

This definition must include answer to two questions

1. What customers will we serve? (segmentation and targeting)

2. How can we serve these customers best? (value proposition)

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Select Customer to Serve Marketers decide who they will serve by dividing

the market into segments of customers. And select which segment they will go after (target marketing).

Market segmentation: “ dividing a market into different groups with similar needs, characteristics, or behaviors”

Target marketing: the process of evaluating each market segment’s attractiveness and selecting one or more segment to enter.

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Select Customer to Serve Demand management

Marketers must deal with different demand states ranging from no demand to too much demand.

Marketing managers must decide which customer they want to target, and on level, timing, and nature of their demand to meet the organization objectives.

Simply

Marketing management is: customer management and demand management

Demand StatesNegative Demand

• Consumer dislike the product and may even pay a price to avoid it (vaccination)

Nonexistent Demand

• Consumer may be unaware or uninterested in the product (very advanced technology)

Latent Demand

• Consumer may share a strong need that cannot be satisfied by an existing product (cancer medicine)

Declining Demand

• Consumer begin to buy the product less frequently or not at all (pocket-calculator)

Irregular Demand

• Customer purchase vary on a seasonal, monthly, weekly, daily, or even hourly basis (ACs)

Full Demand

• Consumer are adequately buying all products put into the market place (FMCG)

Overfull Demand

• More consumer would like to buy the product than can be satisfied (bread – transportation)

Unwholesome Demand

• Consumer may be attracted to products that have undesirable social consequences (drugs)

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Choosing the Value Proposition

The company then must decide how it will serve targeted customer-how it will differentiate and position it self.

Differentiation: the way that you make your business or product more desirable than all the others like it. (Example: Mercedes “Unlike any other” – BMW “Ultimate Driving Machine”)

Positioning: Is the process by which marketers try to create an identity in the minds of their target market for its product, brand, or organization. It is the image their product occupies in a given market as perceived by the target market. (Example: Honda – BMW)

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Choosing the Value Proposition

Value Proposition:

“Is the set of benefits or values a company promises to deliver to consumers to satisfy their needs.

It answer the customer’s question:

“why should I buy your brand rather than a competitor’s?” (Red Bull Gives You Wiiings)

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Marketing Management Orientations The production concept:

The philosophy that consumers will favor products that are available and highly affordable and that management therefore should focus on improving production and distribution efficiency. (Example: Ford, model T 1908-1927)

The product concept:

The idea that consumers will favor products that offer the most quality, performance, and features and that the organization should therefore devote energy to making continuous product improvements. (Example: the mousetrap)

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Marketing Management Orientations The selling concept

The idea that consumers will not buy enough of the organization’s products unless the organization undertakes a large scale selling and promotion effort. (Example: unsought products - blood donation)

The marketing concept

The marketing management philosophy that holds that achieving organizational goals depends on determining the needs and wants of target markets and delivering the desired satisfactions more effectively than competitors do.

The job is not to find the right customer for your product, but to fined the right product for your customer. (Example: Dell, Wal-Mart)

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The Selling And Marketing Concept Contrasted

Profits throw sales

volume

Selling and promoting

Existing products

Factory The selling

concept“Inside-out”

Starting point

Focus Means Ends

Profits throw

customer satisfactio

n

Integrated marketing

Consumer need

Market

The marketing concept

“Outside-in”

Make and sell

Sense and

respond

Hunting Finding the right customer for your product

GardeningFind the right product for your customers

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Marketing Management Orientations

The societal marketing concept

The idea that the organization should determine the needs, wants and interests of target markets and deliver the desired satisfactions more effectively and efficiently than do competitors in a way that maintains or improves the consumer’s and society’s well being.(Example: fast-food industry)

Consumer (want satisfaction)

company (profit)

Society(human welfare)

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The Marketing Process

Understanding the

market place and

customer needs and

wants

Design a customer-

driven marketing strategy

Construct

marketing

program that delive

r superi

or value

Build profitable

relationship and create customer delight

Capture value from

the customers to

create profits

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Preparing a Marketing Plane and Program The marketing plane actually deliver the value to the

target customer, by transforming the marketing strategy into actions.

The marketing plane consists of the firm’s marketing mix, which called the four Ps

Product: to deliver on it’s value proposition the firm must first create a need-satisfying market offering.

Price: it must decide how much it will charge for the offer.

Place: and how it will make the offer available to target customer.

Promotion: it must communicate with target customer about the offer and persuade them of its merits.

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Marketing Mix and the Customer

Four P’s Four C’s

Product Price Place Promotion

Customer solution Customer cost Convenience Communication

Every marketing tool is designed to deliver a customer benefit and value

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The Marketing Process

Understanding the market

place and customer needs and

wants

Design a customer-

driven marketing strategy

Construct marketing program

that deliver superior value

Build profita

ble relationship and

create customer

delight

Capture value from

the customers to create profits

36

Building Customer Relationships

Customer relationship management CRM

“The overall process of building and maintaining profitable customer relationships by delivering superior customer value and satisfaction. It deals with all aspects of acquiring, keeping and growing customers.”

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CRM Why the emphasis on retaining and growing

customers?

There is fewer customers to go around due to sophisticated competitors, and overcapacity in most industries

costs 5 to 10 times MORE to attract a new customer than it does to keep a current customer satisfied.

The lifetime value of the customer. Is “the value of the entire stream of purchases that the customer would make over a life-time of patronage” (Example: Stew Leonard)

The key in building lasting customer relationship is to create superior value, and satisfaction.

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Customer Rule

Everyone is committed to Rock Rule

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CRMAttracting, Retaining, And Growing Customers

Customer value

Customer perceived value:

○ The difference between total customer value and total customer cost.

TCV – TCC = CPV

○ The customer evaluation of the difference between all the benefits and all the cost of a marketing offer relative to those of competing offers.

Customers often do not judge values and costs accurately or objectively.

Customer often act on perceived value (Example: FedEx)

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CRM Customer satisfaction:

Depend on the product’s perceived performance relative to buyer’s expectations

Performance matches expectations the customer is satisfied, performance exceeds expectations the customer is delighted.

Satisfied customer repeat purchases, and tell others.

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The Marketing Process

Understanding the market

place and customer needs and

wants

Design a customer-

driven marketing strategy

Construct marketing program

that deliver superior value

Build profitable

relationship and create customer delight

Capture

value from the

customers

to create profits

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Capturing Value From Customer

Customer loyalty and retention:

Loyalty increases as satisfaction levels increase

Customer delight leads to emotional relationships and loyalty

loyal customers are less price sensitive.

Customer Lifetime Value shows true worth of a customer

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Capturing Value From Customer

Growing share of customer

Share of customer’s purchase in a product category.

Cross-selling and up-selling (Example: Vodafone& mobile phones – TE-Data, the wireless modem)

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Capturing Value From Customer

Building customer equity

The total combined customer lifetime values of all current and potential customers.

Measures a firm’s performance, but in a manner that looks to the future.

Customer lifetime value and customer equity are the name of the game. (Example: Cadillac and BMW)

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Customer relationships levels and tools

Target market nature decide the type the relationship

Basic relationship / low-margin customers

Full partnership / high margin customers

Customer loyalty and retention tools

Adding financial benefits – frequency marketing programs (Example: Marie Louis)

Adding social benefits – club marketing programs (Example: Swatch)

Adding structural ties – special equipments (Example: FedEx)

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Marketing Challenges in the 21st Century

The new digital ageGrowth of the Internet

Advances in telecommunications, information, transportation

○ Customer research and tracking

○ Product development

○ Distribution

○ New advertising tools

○ 24/7 marketing through the Internet

Rapid globalizationGeographical and cultural distances have shrunk

○ Greater market coverage

○ More options for purchasing and manufacturing

○ Increased competition from foreign competitors

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Marketing Challenges in the 21st Century The call for more ethics and social responsibility

Marketers need to take great responsibility for the impact of their actions

○ Caring capitalism is a way to differentiate your company

The growth of not-for-profit marketing

Many organizations are realizing the importance of strategic marketing

○ Performing arts

○ Government agencies

○ Colleges

○ Hospitals

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Marketing ProcessUnderstanding the market place

and customer

needs and

wants

Design a

customer-

driven marke

ting strate

gy

Construct

marketing

program that deliver superi

or value

Build profita

ble relationship and

create customer

delight

Capture

value from the

customers

to create profits

Research customer and

the market place

Managing marketing

information and customer

data

Select customer to

serve: market segmentation and targeting

Decide on value

proposition: differentiation

and positioning

Product and service design:

building a strong brand

Price Create real value

Distributionmanage

demand and supply chain

Promotion Communicating

the value

Customer relationship

management: build strong relationship with chosen customers

Partner relationship

management : build a strong relationship

with marketing partners

Create satisfied loyal customer

Capture customer life time value

Increase share of market and

share of customer

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What Is Marketing?Pulling It All Together

The process of building profitable customer relationships by creating value

for customers and capturing value in return