Marketing: Creating Customer Value and Satisfaction, Profitably

Chapter Objectives (1)

1. Define marketing, employing such key elements as value, customer relationships, needs, wants and demands.

2. Discuss marketing management and elaborate on the basic ideas of demand management and building profitable customer relationships.

3. List the marketing management philosophies and be able to distinguish between them.

4. Analyse the key marketing challenges of this century and reflect on the ways these might be overcome.

What Is Marketing?

• An activity, and set of processes for creating, communicating, delivering and exchanging offerings that have value for customers; partners; and society at large.

Cont’d

An on-going process of planning and executing the development,

the promotion,

the pricing, and

the distribution

of products to create exchanges that satisfy the requirements of both the customer and the business firm.

The Marketing Process

Selling and Promotion are:

A. are synonymous with the term marketing

B. are only the tip of the marketing iceberg

C. are the most important marketing functions

D. are the least important marketing functions

E. are not part of marketing

Understanding the Marketplace and Consumer Needs

• Marketers need to understand customer needs, wants and demands and the marketplace within which they operate.

• This requires the firm to undertake research in its chosen target market(s).

Needs, Wants and Demands

• Human needs are the most basic concept underlying marketing.– Humans have many complex needs including physical;

social; and individual needs.– Basic needs are part of human makeup and are stimulated

by marketers, not created by them.– When a need is not satisfied, a person will try to reduce the

significance of that need, or look for something to satisfy it.– Advanced societies will try to develop products that will

satisfy the needs of their community.– However, those in less-developed societies might have to

reduce their needs and satisfy them with whatever is available.

Needs, Wants and Demands

• Wants are the specific items that will satisfy the particular human needs, and are shaped by culture and individual personality.– A hungry person in Australia or Singapore might

want something different for lunch to what a hungry person in Japan would want.

– As a society evolves and develops, the wants of its members expand.

– Marketers try to provide more products that can satisfy these increasing consumer wants.

Needs, Wants and Demands

• Demands are those specific wants that are backed up by the consumer’s ability to buy.– Customers view products as bundles of benefits and

choose those that give them the best value for their money.– Successful firms go to great lengths to learn about and

understand consumers’ needs; wants; and demands.– These firms conduct consumer research; monitor consumer

behaviour, complaints and inquiries; and analyse warranty and service performance data.

– Understanding these needs; wants; and demands in detail provides important input for designing marketing strategies.

Want supported by buying power is best described as a(n):

A. need

B. desire

C. demand

D. exchange

E. manifestation of greed

Market Offerings: Goods, Services and Experiences

• A market offering is a product that is some combination of goods, services and experiences that can be offered to a market to satisfy a need or want.

• A product includes physical objects; services; people; places; ideas; and organisations. Anything that satisfies a need/ want can be called a product.

• Marketers often use the expression goods and services to distinguish between tangible and intangible products. However, these should be viewed as a continuum, not as opposing elements.

Perceived Value and Satisfaction

• Customer perceived value is the difference between the benefits the customer gains in owning and using a product, and the costs of obtaining that product.

• Customer Satisfaction is the extent to which a product’s perceived performance matches, or exceeds, the buyer’s expectations.

Exchange, Transactions and Relationships

• Exchange is the act of obtaining a desired object from someone by offering something in return.

• Exchange means that people do not need to depend on handouts, or need to have the skills that are required to produce every necessity for themselves.

• Exchange is the core concept of marketing. For an exchange, several conditions must be satisfied:• At least two parties must participate, and each

must offer something that the other values.• Each party must want to deal with the other, and

be free to accept or reject an offer.• Each party must be able to communicate and

deliver the offer.

Cont’d

• A transaction is marketing’s unit of measurement, and consists of a trade of value between two parties.

• In transactions it must be possible to clearly define what each party is giving and gaining.

• Relationship marketing is the process of creating, maintaining and enhancing strong, value-laden relationships with customers and other stakeholders.

A Market

• Is defined as the set of all actual and potential buyers of a product.

• Each of these buyers is identified as having a sufficiently similar need, which can be satisfied by the same specific product

A Simple Marketing System

Marketing

• Marketing means managing markets to bring about exchanges for the purpose of satisfying human needs and wants.

• Marketing is carried out by both sellers and buyers, and by company purchasing agents.

Elements of a Modern Marketing System

Designing a Customer-Driven Marketing Strategy

• Marketing management is:– The analysis, planning, implementation and

control of programs designed to create, communicate and deliver value to customers and facilitate managing customer relationships in ways that enable the organisation to meet its objectives and those of its stakeholders.

• A winning marketing strategy asks ‘what customers will we serve?’ and ‘Who is our target market?’

Selecting Customers to Serve

• Marketers cannot serve all customers in every way with a single market offering.

• It is necessary to select customers that can be served well and profitably.

• De-marketing is marketing in which the task is to temporarily or permanently reduce demand to a level that is more manageable.

Selecting Customers to Serve

• Managing demand means managing customers who come from two groups: new and repeat customers.

• Keeping existing customers is important as the cost of retaining them is much less than attracting new ones.

• Marketers retain customers by ensuring that branded goods, services and experiences offer intrinsic value and that there is a sense of enjoyment/ excitement associated with the marketing offering and communication used.

• Context is important – excitement not always appropriate.• The key to offering excitement is involvement/ interactivity.

Emotional Engagement

Choosing a Value Proposition

• A firm must decide how it will serve targeted customers, and how it will differentiate and position itself in the marketplace.

• A value proposition is the set of benefits or values the firm promises to deliver to consumers to satisfy their needs.

The Marketing MIX

• The basic mix is defined as the ‘4 Ps’

• Product; Price; Promotion; and Place

• Is the only means a marketer has of handling changes in his environment

• Firms will modify their Mix in order to deal with the situation in the market.

Marketing Management Orientations

• The Production Concept

• The Product Concept

• The Selling Concept

• The Marketing Concept

Production

• Consumers prefer products that are widely available, and relatively inexpensive to purchase

• The firm’s focus would be on improving production and distribution efficiency to reduce product costs and therefore be in a position to sell more cheaply

Product

• Consumers prefer those products that offer the most quality; the best performance; or Innovative features.

• Firm’s focus would, primarily, be on regular product enhancement.

Selling/ Sales

• Consumers will buy certain products only if they are aggressively promoted and sold.

• Firm’s focus would be on advertising and sales activities, especially for those products that consumers do not actively look for.

Marketing

• Attempt to identify the needs/ wants of the target market, and then offer a solution that delivers more value than the competitors’ products.

• Firm’s focus would be on delivering customer satisfaction, at a profit.

Selling and Marketing Concepts

Societal Marketing

• Organisations should determine the needs, wants and interests of target markets and deliver the desired satisfaction more effectively and efficiently than competitors in a way that maintains or improves the customers’ and society’s well-being.

Cont’d

• Overall, should aim to satisfy:– Company profits– Consumer needs/ wants– Community well-being

• Preserve or enhance the long-term best interests of the consumer and society– Less toxic– More durable– Reusable; or have recyclable materials

Considerations Underlying the Societal Marketing Concept

Integrated Marketing Program

• The company’s marketing strategy outlines which customers the company will serve and how it will create value.

• The integrated marketing program is developed to actually deliver the value to target customers.

• The program builds relationships by transforming the strategy into action

• It is, in effect, the firm’s Marketing Mix.

The Extended Marketing Mix

Extended ‘Services’ Mix

• The ‘7 Ps’ - basic Mix, plus:

• People – high involvement in the sale

• Processes – that add to/ detract from

• Physical elements – help in assessment

Building Customer Relationships

• The first three steps in the marketing process:– Understanding the marketplace and customer

needs– Designing a customer-driven strategy – Marketing programs lead to the most

important step: building profitable customer relationships.

Customer Relationship Management (CRM)

• CRM is the overall process of building and maintaining profitable customer relationships by delivering superior customer value and satisfaction.

• CRM deals with all aspects of acquiring; keeping; and growing customers.

Relationship Building Blocks:Customer Value and Satisfaction

• The key to building long lasting relations is to create superior customer value and satisfaction.– Customer Perceived Value is the evaluation of

the difference between the benefits and all the costs of a market offering relative to those of competing offers.

– Customer Satisfaction depends on the product’s perceived performance matching a buyer’s expectations. If the product’s performance falls short of expectations, the buyer is dissatisfied. If the performance matches or exceeds expectations, the buyer is satisfied or delighted.

The Changing Nature of Customer Relationships

• Companies are building more direct and lasting relationships with more carefully selected customers.– CRM is used to retain current customers and build

long term, valuable relationships with them.– Companies now use customer profitability analysis

to identify low-value customers and relate to winning customers (selective CRM).

– Companies aim to connect more deeply and, often, more directly with customers. Direct marketing is on the increase.

Capturing Value from Customers

• Creating Customer Loyalty and Retention– Good CRM creates customer delight. Delighted

customers remain loyal and talk favourably about the company.

• Growing Share of Customer– Good CRM can help marketers to increase their

share of customer.

• Building Customer Equity– This is the combined discounted customer

lifetime values of all the company’s current and potential customers.

Building the Right Relationship with the Right Customers

The New Marketing Landscape

• Marketing operates within a dynamic global environment. Rapid changes can quickly make a winning strategy out of date.

• Today’s companies deal with changing customer values and orientations; market maturity in many industries; movement of manufacturing to least cost countries; environmental degradation; increased global competition; and many other economic, political and social issues.

Cont’d

• However, problems can also become marketing opportunities.

• New trends include:– the growth of not-for-profit marketing

– increasing level of globalisation

– rapid changes in technology

– dramatic change in the world economy

– the call for more socially responsible actions.

Cont’d

• Not-for-profit marketing:– Including philanthropic organisations; universities;

hospitals; museums, orchestras; and churches.

• Globalisation:– Most marketing organisations are affected in

some way by global competition.

• Customer Information and Digital Marketing:– The IT explosion is accelerating the rate of

change, and the growth of global competitors.

Cont’d

• The world economy:– Many countries have grown poorer; around the

world, people’s needs are greater, but many lack the means to pay for necessary goods.

• Ethical behaviour and social responsibility:– There is an increased call for companies to take

responsibility for the social and environmental impact of their actions.

Each of the following conditions must be satisfied for an exchange to take place except:

A. the existence of a monetary system

B. two parties each possessing something of value to the other

C. the ability to accept or reject the offer

D. ability to communicate and deliver

E. each party wanting to deal with the other