Chapter 1

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

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 value2. 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”

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.

Marketers should understand consumer needs, develops products that provide superior value, and price, distributes, and promotes them effectively.

TheThe Marketing Process

Understanding The Market Understanding The Market PlacePlace Marketing Core Concepts:

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

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

DemandsHuman wants that are backed by buying power

To understand customer needs wants and demands marketers conduct consumer research and analyze customer data

Market offersMarket offers Some combination of products, services,

information, or experiences offered to a market to satisfy.

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.

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”

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.

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.

Exchanges and Exchanges and RelationshipRelationship The act of obtaining a desired object

from someone by offering something in return

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

Relationships are built through delivering value and satisfaction

Markets Markets The Market is:“ The set of actual and potential buyers of

a product.”

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.

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)

Select Customer to Select Customer to ServeServe 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.

Demand management

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

Choosing the Value Choosing the Value PropositionProposition The company 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)

Value Proposition:“Is the set of benefits or values a company

promises to deliver to consumers to satisfy their needs

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)

Marketing Management Marketing Management Orientations Orientations The selling conceptThe 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 conceptThe 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. (Example: Dell, Wal-Mart)

Marketing Management Marketing Management Orientations Orientations The societal marketing conceptThe 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)

Preparing a Marketing Preparing a Marketing Plane and ProgramPlane 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 PsProduct: 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.

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.”

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.

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)

CRMCRM

Customer satisfaction:Depend on the product’s perceived

performance relative to buyer’s expectationsPerformance matches expectations the

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

Satisfied customer repeat purchases, and tell others.

Capturing Value From Capturing Value From Customer Customer Customer loyalty and retention:

Loyalty increases as satisfaction levels increaseCustomer delight leads to emotional relationships and

loyalty loyal customers are less price sensitive.Customer Lifetime Value shows true worth of a customer

Growing share of customerShare of customer’s purchase in a product category.Cross-selling (Example: Vodafone – TE-Data, the wireless

modem) 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)

Customer relationships levels and tools Target market nature decide the type the

relationshipBasic relationship / low-margin customers Full partnership / high margin customers

Customer loyalty and retention toolsAdding financial benefits – frequency marketing

programs (Example: Marie Louis)Adding social benefits – club marketing programs

(Example: Swatch)Adding structural ties – special equipments (Example:

FedEx)

Marketing Challenges in the Marketing Challenges in the 2121stst Century Century 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

Marketing Challenges in the Marketing Challenges in the 2121stst Century Century

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

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

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