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Chapter 1

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Objectives 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 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 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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TheThe Marketing Process

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Create value for the customer and build customer relationship

Capture value from customer

in return

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TheThe Marketing Process

Marketing Core Concepts:

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Maslow’s Hierarchy of Maslow’s Hierarchy of Needs Needs

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Needs, Wants, and Needs, Wants, and DemandDemand 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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Market offeringsMarket 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 OffersMarket 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 Customer Value and SatisfactionSatisfaction 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 Exchanges and RelationshipRelationship 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 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: 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

1-16

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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

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SupplierSuppliers s

Marketing Marketing intermediintermedi

aries aries

Final Final users users

Major environmental forces

TheThe Marketing Process

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Designing a Customer-Designing a Customer-Driven Marketing Strategy 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 ServeSelect 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 segmentationMarket segmentation: : “ dividing a market into different groups with similar needs, characteristics, or behaviors”

Target marketing: 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 Select Customer to ServeServe 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.

Simply

Marketing management is: customer management and demand management

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Choosing the Value Choosing the Value PropositionProposition The company then must decide how it will serve

targeted customer-how it will differentiate and position it self.

DifferentiationDifferentiation: 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”)

PositioningPositioning: 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 Choosing the Value PropositionProposition 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 Marketing Management Orientations 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 Marketing Management Orientations 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

The selling concept

“Inside-out”

Starting point

Focus Means Ends

The marketing concept

“Outside-in”

Make Make and and sell sell

Sense Sense and and

respond respond

Hunting Finding the right customer for your product

GardeningFind the right product for your customers

Marketing Management Marketing Management Orientations 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 Consumer (want satisfaction)(want satisfaction)

company company (profit)(profit)

SocietySociety(human welfare)(human welfare)

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TheThe Marketing Process

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

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

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

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

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TheThe Marketing Process

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Building Customer Building Customer RelationshipsRelationships 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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CRMCRM 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 RuleEveryone is committed to Rock Rule

CRMCRM 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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CRMCRM 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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TheThe Marketing Process

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Capturing Value From Capturing Value From Customer 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 Capturing Value From Customer 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 Capturing Value From Customer 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 21Marketing Challenges in the 21stst CenturyCentury The new digital age

Growth of the InternetAdvances 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 21Marketing Challenges in the 21stst CenturyCentury The call for more ethics and social

responsibilityMarketers 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 marketingMany organizations are realizing the importance of

strategic marketing

○ Performing arts

○ Government agencies

○ Colleges

○ Hospitals

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Marketing Process

Research Research customer customer and the and the

market placemarket placeManaging Managing marketing marketing

information information and and

customer customer datadata

Select Select customer to customer to

serve: market serve: market segmentation segmentation and targetingand targeting

Decide on Decide on value value

proposition: proposition: differentiation differentiation

and and positioningpositioning

Product and Product and service service design: design:

building a building a strong brandstrong brand

Price Create Price Create real value real value

DistributionDistributionmanage manage

demand and demand and supply chain supply chain

Promotion Promotion CommunicatinCommunicatin

g the value g the value

Customer Customer relationship relationship

management: management: build strong build strong relationship relationship with chosen with chosen customerscustomers

Partner Partner relationship relationship

management : management : build a strong build a strong relationship relationship

with marketing with marketing partners partners

Create Create satisfied loyal satisfied loyal

customer customer

Capture Capture customer life customer life time value time value

Increase share Increase share of market and of market and

share of share of customer customer

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What Is Marketing?What Is Marketing?Pulling It All TogetherPulling It All Together

The process of building profitable customer relationships by creating value

for customers and capturing value in return

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