Principles of Marketing (4203)

Chapter 1

Creating & Capturing Customer Value

 Creating & Capturing Customer Value

Todays successful companies have one thing in common:

They are strongly customer focused and heavily

committed to marketing.

These companies share a passion for understanding and

satisfying customer needs in well-defined target markets.

They motivate everyone in the organization to help build

lasting customer relationships based on creating value.

 Creating & Capturing Customer Value
Customer relationships and value are especially
important today. As the nations economy has recovered
following the worst downturn since the Great
Depression, more frugal consumers are spending more
carefully and reassessing their relationships with brands.

In turn, its more important than ever to build strong

customer relationships based on real and enduring value.

 Learning Objectives
After studying this chapter, you should be able to:

Define marketing and outline the steps in the marketing process

Explain the importance of understanding customers and the marketplace, and

identify the five core marketplace concepts

Identify the key elements of a customer-driven marketing strategy and discuss

the marketing management orientations that guide marketing strategy

Discuss customer relationship management, and identify strategies for

creating value for customers and capturing value from customers in return

Describe the major trends and forces that are changing the marketing

landscape in this age of relationships

 Marketing Defined
Marketing: is the process by which companies create
value for customers and build strong customer
relationships to capture value from customers in return.

The twofold goal of marketing is:

to attract new customers by promising superior value,

and
keep and grow current customers by delivering

satisfaction.
 Marketing Defined

Broadly defined: Marketing is a social and managerial

process by which individuals and organizations obtain
what they need and want through creating and
exchanging value with others.

In a narrower business context: Marketing involves

building profitable, value laden exchange relationships
with customers.
 The Marketing Process
Understand the marketplace and customer wants and

needs
Design a customer-driven marketing strategy

Construct a marketing plan that delivers superior value

Build profitable relationships and create customer

satisfaction
Capture value from customers to create profit and

customer equity
 Understand the marketplace and customer
wants and needs
Market OfferingsProducts, Services, and Experiences

Market offerings are some combination of products, services,

information, or experiences offered to a market to satisfy a need or
want

They also include services activities or benefits offered for sale that are
essentially intangible and do not result in the ownership of anything.

Examples include banking, airline, hotel, tax preparation, and home

repair services.
 Understand the marketplace and customer wants and
needs
Market OfferingsProducts, Services, and Experiences

Marketing myopia is focusing only on existing wants and losing sight of underlying
consumer needs.

For example: Many sellers make the mistake of paying more attention to the specific
products they offer than to the benefits and experiences produced by these
products.

These sellers will have trouble if a new product comes along that serves the
customers need better or less expensively. The customer will have the same need
but will want the new product.

Exchange is the act of obtaining a desired object from someone by offering something
in return
 Understand the marketplace and customer
wants and needs
Customer Needs, Wants, and Demands
The most basic concept underlying marketing is that of human
needs.

Needs are states of deficiency

Physicalfood, clothing, warmth, safety

Socialbelonging and affection

Individualknowledge and self-expression

Marketers did not create these needs; they are a basic part
of the human makeup
 Understand the marketplace and customer
wants and needs
Customer Needs, Wants, and Demands

Wants are the form that needs take as they are shaped by
culture and individual personality

For example: An American needs food but wants a Big Mac,

french fries, and a soft drink. A person in China needs
food but wants rice, seafood, and pork.

Demands are wants backed by buying power of customers. For

example in Bangladesh everyone cannot buy lobsters from
market.
Understand the marketplace and customer wants and needs
Customer Value and Satisfaction

Expectations

Customers

Value and satisfaction

Customers form expectations about the value and

satisfaction that various market offerings will deliver
and buy accordingly. Satisfied customers buy again
and tell others about their good experiences.
 Understand the marketplace and customer wants and
needs

Marketers:
Set the right level of expectations
Not too high or too low

Marketers must be careful to set the right level of expectations. If

they set expectations too low, they may satisfy those who buy
but fail to attract enough buyers. If they set expectations too
high, buyers will be disappointed.
 Understand the marketplace and customer wants and needs
Exchanges and Relationships

Marketing occurs when people decide to satisfy needs and wants through
exchange relationships.

Exchange is the act of obtaining a desired object from someone by offering

something in return

Relationships consist of actions to build and maintain desirable relationships

Marketing consists of actions taken to build and maintain desirable exchange

Relationships with target audiences involving a product, service, idea, or other

object.

Beyond simply attracting new customers and creating transactions, companies

want to retain customers and grow their businesses.

 Understand the marketplace and customer
wants and needs
Markets are the set of actual and potential buyers of a

product

Marketing system consists of all of the actors (suppliers,

company, competitors, intermediaries, and end users) in

the system who are affected by major environmental

forces, such as:

Demographic; Economic; Physical; Technological;

Politicallegal; and Socio-cultural

A Modern Marketing System
 A Modern Marketing System
Arrows represent relationships that must be developed and

managed to create customer value and profitable customer

relationships.

Each party in the system adds value for the next level.

For example:

Wal-Mart cannot fulfill its promise of low prices unless its suppliers
provide low costs.

Ford cannot deliver a high quality car-ownership experience unless

its dealers provide outstanding service.
 Designing a Customer-Driven Marketing
Strategy
Marketing Management
Marketing management is the art and science of
choosing target markets and building profitable
relationships with them.

To design a winning marketing strategy, the marketing

manager must answer two important questions:
What customers will we serve?

How can we best serve these customers?

 Designing a Customer-Driven Marketing Strategy
Selecting Customers to Serve
Some people think of marketing management as finding
as many customers as possible and increasing demand.
But marketing Managers know that they cannot serve
all customers in every way. By trying to serve all
customers, they may not serve any customers well.

Therefore, The company must first decide whom it will

serve. It does this by dividing the market into
 Designing a Customer-Driven Marketing Strategy

Selecting Customers to Serve

Market segmentation: Dividing the markets into

segments of customers

Target marketing: Which segments to go after

De-marketing: Marketing to reduce demand

temporarily or permanently; the aim is not to
destroy demand but to reduce or shift it.
Designing a Customer-Driven
Marketing Strategy

Selecting Customers to Serve

Marketing management is:

Customer management

Demand management
 Designing a Customer-Driven Marketing Strategy
Choosing a Value Proposition

The value proposition is the set of benefits or values a company

promises to deliver to customers to satisfy their needs.

Some example of brand value propositions:

BMW promises the ultimate driving machine.

AT&T, its Your World. Delivered.

T-Mobile, family and friends can Stick together.

Think about Garmin Phone & Robi?

 Designing a Customer-Driven Marketing
Strategy
Marketing Management Orientation
Marketing management wants to design strategies that will build
profitable relationships with target consumers.
Production concept
Product concept
Selling concept
Marketing concept
Societal concept
Production concept
 Designing a Customer-Driven Marketing
Strategy

Marketing Management Orientations

Production concept is the idea that consumers will favor

products that are available or highly affordable

Product concept is the idea that consumers will favor

products that offer the most quality, performance, and

features for which the organization should therefore

devote its energy to making continuous improvements

 Designing a Customer-Driven Marketing
Strategy

Marketing Management Orientations

Selling concept is the idea that consumers will not buy

enough of the firms products unless it undertakes a large

scale selling and promotion effort

Marketing concept is the idea that achieving organizational

goals depends on knowing the needs and wants of the

target markets and delivering the desired satisfactions

better than competitors do

 Designing a Customer-Driven Marketing
Strategy

Marketing Management Orientations

Societal (Public) marketing concept is the idea

that a company should make good marketing
decisions by considering consumers wants, the
companys requirements, consumers long-term
interests, and societys long-run interests
Preparing an Integrated Marketing Plan and
Program
Marketing Mix

The marketing mix is the set of tools (four Ps) the firm uses
to implement its marketing strategy

Product

Price

Promotion

Place
 Preparing an Integrated Marketing Plan
and Program

Integrated Marketing Program

Integrated marketing program is a comprehensive

plan that communicates and delivers the
intended value to chosen customers
 Building Customer Relationship
Customer Relationship Management
(CRM)
Customer relationship management is the overall process of
building and maintaining profitable customer
relationships by delivering superior value and satisfaction

Customer perceived value is the difference between total

customer value and total customer cost

Customer satisfaction is the extent to which a products

perceived performance matches a buyers expectations
 Building Customer Relationship
Customer Relationship Management
(CRM)
Customer Relationship Levels and Tools

Basic relationship

Full relationships

Frequency marketing programs

Club marketing programs

 Building Customer Relationship
The Changing Nature of Customer Relationships

Relating with more carefully selected customers uses selective

relationship management to target fewer, more profitable

customers

Relating for the long term uses customer relationship management to

retain current customers and build profitable, long-term

relationships

Relating directly uses direct marketing tools (telephone, mail order,

kiosks, Internet) to make direct connections with customers

 Building Customer Relationship

Partner Relationship Management

Partner relationship management refers to

working closely with partners in other
company departments and outside the
company to jointly bring greater value to
customers
 Building Customer Relationship
Partner Relationship Management

Partners inside the company is every function area

interacting with customers

Electronically

Cross-functional teams

Partners outside the company is how marketers connect

with their suppliers, channel partners, and competitors

by developing partnerships
 Building Customer Relationship

Partner Relationship Management

Supply chain is a channel that stretches from raw

materials to components to final products to final
buyers
Supply management

Strategic partners

Strategic alliances
 Capturing Value from Customers

Creating Customer Loyalty and Retention

Customer lifetime value is the value of the

entire stream of purchases that the
customer would make over a lifetime of
patronage