Learning Objectives

1-1 Define marketing and outline the steps in the marketing process.

1-2 Explain the importance of understanding the marketplace and customers and identify the five core marketplace
Chapter 1 concepts.

1-3 Identify the key elements of a customer-driven marketing strategy and discuss the marketing management
orientations that guide marketing strategy.
Marketing: 1-4 Discuss customer relationship management and identify strategies for creating value for customers and
Creating Customer Value and Engagement capturing value from customers in return.

1-5 Describe the major trends and forces that are changing the marketing landscape in this age of relationships.

Understanding the Marketplace and Customer Needs

What is Marketing?
Needs are states of felt deprivation.
Marketing is a process by which companies create value for customers
and build strong customer relationships in order to capture value from Wants are the form human needs take
customers in return. as they are shaped by culture and
individual personality.
Demands are human wants that are
backed by buying power.
Understanding the Marketplace and Customer Needs
Understanding the Marketplace and Customer Needs
Market offerings are some combination
of products (smartphone), services Exchange is the act of obtaining a desired object from someone by
(beauty clinic), information (consultancy), offering something in return.
or experiences (holiday) offered to a
Marketing actions try to create, maintain, and grow desirable exchange
market to satisfy a need or want.
relationships.
Marketing myopia is focusing only on
existing wants and losing sight of
underlying consumer needs.
Kodak Camera, Sony Walkman, Yahoo
Messenger

Understanding the Marketplace and

Understanding the Marketplace and Customer Needs
Customer Needs

A market is set of actual and potential buyers.

Consumers market when they:
• search for products
• interact with companies to obtain information
• make purchases
Designing a Customer Value-Driven Marketing Strategy Designing a Customer Value-Driven Marketing Strategy
Marketing management is the art and science of choosing target markets A brand’s value proposition is the set of
and building profitable relationships with them. benefits or values it promises to deliver to
• What customers will we serve (target market)? customers to satisfy their needs.
• How can we best serve these customers (value proposition)? Facebook helps you “connect and share with the people in
your life”
YouTube “provides a place for people to connect, inform,
and inspire others across the globe.”
BMW promises “the ultimate driving machine”
Nissan Leaf electric car is “100% electric. Zero gas. Zero
tailpipe.”

Designing a Customer Value-Driven

Marketing Strategy Designing a Customer Value-Driven Marketing Strategy

• The company must decide how it will serve targeted

customers—how it will differentiate and position itself in the
marketplace. A brand’s value proposition is the set of benefits or
values it promises to deliver to consumers to satisfy their needs. Societal
Production Product Selling Marketing
Marketing
concept concept concept concept
concept
• Value propositions differentiate one brand from another. They
answer the customer’s question, “Why should I buy your brand
rather than a competitor’s?” Companies must design strong
value propositions that give them the greatest advantage in
their target markets.

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Designing a Customer Value-Driven Marketing Strategy Designing a Customer Value-Driven Marketing Strategy

• Production concept: Consumers will favor products that are

available and highly affordable. • Product concept: Consumers favor products that offer the most quality,
performance, and features.
• The production concept is still a useful philosophy in some • The focus is on continuous product improvements. Product quality and
situations. For example in the highly competitive, price-sensitive improvement are important parts of most marketing strategies. However,
Chinese market, both personal computer maker Lenovo and home focusing only on the company’s products can also lead to marketing
myopia. For example, some manufacturers believe that if they can “build a
appliance maker Haier dominate through low labor costs, high better mousetrap, the world will beat a path to their doors.”
production efficiency, and mass distribution.
• But they are often rudely shocked. Buyers may be looking for a better
• However, although useful in some situations, the production concept solution to a mouse problem but not necessarily for a better mousetrap.
can lead to marketing myopia and losing sight of the real objective— • The better solution might be a chemical spray, an exterminating service, a
house cat, or something else that suits their needs even better than a
satisfying customer needs and building customer relationships. mousetrap.

Designing a Customer Value-Driven Marketing Strategy Designing a Customer Value-Driven Marketing Strategy

• Marketing concept: Know the needs and wants of the target

• Selling concept: Consumers will not buy enough of the firm’s markets and deliver the desired satisfactions better than
products unless the firm undertakes a large-scale selling and competitors.
promotion effort.
• The selling concept is typically practiced with unsought goods— • Under the marketing concept, customer focus and value are the
those that buyers do not normally think of buying, such as life paths to sales and profits.
insurance or blood donations. These industries must be good at
tracking down prospects and selling them on a product’s benefits. • Instead of a product-centered make-and-sell philosophy, the
marketing concept is a customer-centered sense-and-respond
• Such aggressive selling, however, carries high risks. It focuses on philosophy. The job is not to find the right customers for your
creating sales transactions rather than on building long-term, product but to find the right products for your customers
profitable customer relationships.
 Designing a Customer Value-Driven Designing a Customer Value-Driven
Marketing Strategy Marketing Strategy

Societal marketing:
The company’s marketing
decisions should consider
consumers’ wants, the
company’s requirements,
consumers’ long-run
interests, and society’s
long-run interests.

Designing a Customer Value-Driven Marketing Strategy

The marketing mix is comprised of a set of tools known as the four Ps: Managing Customer Relationships and Capturing
Customer Value
1. Product To deliver on its value proposition, the firm must first create a need- Customer relationship management—the overall process of building and maintaining
satisfying market offering (product). profitable customer relationships by delivering superior customer value and satisfaction.

2. Price It must then decide how much it will charge for the offering (price). • Some marketers define it narrowly as a customer data management activity (a practice
called CRM). By this definition, it involves managing detailed information about individual
customers and carefully managing customer touchpoints to maximize customer loyalty.
3. Place how it will make the offering available to target consumers (place)
• In the broader sense, customer relationship management is the overall process of
building and maintaining profitable customer relationships by delivering superior
4. Promotion Finally, it must engage target consumers, communicate about the customer value and satisfaction. It deals with all aspects of acquiring, engaging, and
growing customers.
offering, and persuade consumers of the offer’s merits (promotion).

• Integrated marketing program—a comprehensive plan that communicates and

delivers intended value
Managing Customer Relationships and Managing Customer Relationships and Capturing
Capturing Customer Value Customer Value

Relationship Building Blocks • Customer satisfaction depends on the product’s perceived performance
relative to a buyer’s expectations. If the product’s performance falls short
of expectations, the customer is dissatisfied. If performance matches
Customer- Customer
expectations, the customer is satisfied. If performance exceeds
perceived value satisfaction expectations, the customer is highly satisfied or delighted.

• The difference • The extent to

• Outstanding marketing companies go out of their way to keep important
between total which perceived customers satisfied. Most studies show that higher levels of customer
customer performance satisfaction lead to greater customer loyalty, which in turn results in better
perceived matches a company performance. Smart companies aim to delight customers by
benefits and buyer’s promising only what they can deliver and then delivering more than they
customer cost expectations
promise.
• Delighted customers not only make repeat purchases but also become
willing marketing partners and “customer evangelists” who spread the
word about their good experiences to others.

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Managing Customer Relationships and Capturing Managing Customer Relationships and

Customer Value Capturing Customer Value
Customer-Engagement Marketing • Customer-engagement marketing goes beyond just selling a brand to
consumers. Its goal is to make the brand a meaningful part of consumers’
fosters direct and continuous customer conversations and lives.
involvement in shaping brand
conversations, experiences, and • Today, companies are using online, mobile, and social media to refine their
targeting and to engage customers more deeply and interactively. The new
community. marketing is customer-engagement marketing.
• The burgeoning Internet and social media have given a huge boost to customer-
engagement marketing. Today’s consumers are better informed, more connected,
and more empowered than ever before.
• Life is Good is a great example of customer-engagement marketing. The
company starts with a deeply felt, engagement-worthy sense of purpose:
spreading the power of optimism. Then it creates online and social media tools
that let people engage and help co-author the brand’s story.

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 Managing Customer Relationships and Managing Customer Relationships and
Capturing Customer Value Capturing Customer Value
Consumer-Generated Marketing • This might happen through uninvited consumer-to-consumer exchanges in blogs, video-
Brand exchanges created by consumers
sharing sites, social media, and other digital forums. But increasingly, companies
themselves. themselves are inviting consumers to play a more active role in shaping products and
brand content. Some companies ask consumers for new product and service ideas.
Consumers are playing an increasing
role in shaping brand experiences.
• For example, Mountain Dew stirred up user-generated content to create buzz around a
limited-time reintroduction of its iconic Baja Blast beverage, boosting online chatter by 170
percent.

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Managing Customer Relationships and Managing Customer Relationships and

Capturing Customer Value
Capturing Customer Value
Customer lifetime value is the value of the
Partner relationship management involves working closely with partners entire stream of purchases that the
in other company departments and outside the company to jointly bring customer would make over a lifetime of
greater value to customers. patronage.
Managing Customer Relationships and Capturing
Customer Value Managing Customer Relationships and Capturing
• Good customer relationship management creates customer satisfaction. In turn,
Customer Value
satisfied customers remain loyal and talk favorably to others about the company
and its products. Share of customer is the portion of the customer’s purchasing that a
company gets in its product categories.
• Studies show big differences in the loyalty of customers who are less satisfied,
somewhat satisfied, and completely satisfied. Keeping customers loyal makes
good economic sense. Loyal customers spend more and stay around longer.
Research also shows that it’s five times cheaper to keep an old customer than
acquire a new one. Conversely, customer defections can be costly. Losing a
customer means losing more than a single sale. It means losing the entire stream
of purchases that the customer would make over a lifetime of patronage.

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Managing Customer Relationships and Capturing

Customer Value
Managing Customer Relationships and Capturing Customer Value
• Beyond simply retaining good customers to capture customer lifetime value, good
customer relationship management can help marketers increase their share of Customer equity is the total combined customer
customer—the share they get of the customer’s purchasing in their product lifetime values of all of the company’s customers.
categories. Thus, banks want to increase “share of wallet.” Supermarkets and
restaurants want to get more “share of stomach.” Car companies want to
increase “share of garage,” and airlines want greater “share of travel.” • Customer equity is the total combined customer
lifetime values of all of the company’s current and
• To increase share of customer, firms can offer greater variety to current potential customers.
customers or they can create programs to cross-sell and up-sell to market more • As such, it’s a measure of the future value of the
products and services to existing customers. For example, Amazon is highly company’s customer base.
skilled at leveraging relationships with its 237 million customers to increase its
share of each customer’s spending budget. • Clearly, the more loyal the firm’s profitable
customers, the higher its customer equity.
 Managing Customer Relationships and Capturing Customer Value Managing Customer Relationships
and Capturing Customer Value
• Customer equity may be a better measure of a firm’s performance than current sales or
market share. Whereas sales and market share reflect the past, customer equity suggests
the future.

• Marketers should care not just about current sales and market share. Customer lifetime
value and customer equity are the name of the game.

• To increase customer equity, Cadillac is making the classic car cool again among younger
buyers, encouraging consumers to “Dare Greatly.”

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Managing Customer Relationships

and Capturing Customer Value
The Changing Marketing Landscape
Figure 1.5 classifies customers into one of four relationship groups, according to
their profitability and projected loyalty. Each group requires a different relationship Digital and social media marketing involves using digital marketing tools
management strategy. such as web sites, social media, mobile ads and apps, online videos, e-mail,
• Strangers show low potential profitability and little projected loyalty. and blogs that engage consumers anywhere, at any time, via their digital
devices.
• Butterflies are potentially profitable but not loyal.
• True friends are both profitable and loyal. Petco’s Community site is a place where pet lovers can connect,
share, and learn via a blog and discussion boards dedicated to pets of
• Barnacles are highly loyal but not very profitable. all types, from dogs and cats to birds, fish, and reptiles.
The point here is an important one: Different types of customers require different
engagement and relationship management strategies. The goal is to build the right
relationships with the right customers.

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 • In recent years, marketing has also become a major part of the strategies of many not-
for-profit organizations, such as colleges, hospitals, museums, zoos, symphony
The Changing Marketing Landscape orchestras, foundations, and even churches. The nation’s not-for-profits face stiff
competition for support and membership. Sound marketing can help them attract
members, funds, and support.
• Not-for-profit marketing growth • For example, Ben & Jerry’s three-part “linked prosperity” mission drives it to make
fantastic ice cream (product mission), manage the company for sustainable financial
• Rapid globalization growth (economic mission), and use the company “in innovative ways to make the world a
better place” (social mission). Both Ben & Jerry’s and its products are “Made of
Something Better.”
• Sustainable marketing
• As they are redefining their customer relationships, marketers are also taking a fresh look
at the ways in which they relate with the broader world around them. Today, almost every
company, large or small, is touched in some way by global competition.

• Marketers are reexamining their relationships with social values and responsibilities and
with the very Earth that sustains us. As the worldwide consumerism and
environmentalism movements mature, today’s marketers are being called on to develop
sustainable marketing practices.

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So, What Is Marketing? Pulling It All Together

Thank you