Principles of Marketing

Introduction:
 In this chapter, we will know what is marketing? the stages of the marketing process.
Understand the difference between needs, wants, demands.

What is marketing?
Marketing is engaging customers and managing profitable customer relationships.

 The twofold goal of marketing is

 to attract new customers by promising superior value
 to keep and grow current customers by delivering value and satisfaction.
 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.

 Hence, we define marketing as the process by which companies engage customers, build
strong customer relationships, and create customer value in order to capture value from
customers in return.

What is the marketing process?

The five-step model of the marketing process is the process for creating and capturing
customer value.
 In the first four steps, companies work to understand consumers, create customer value,
and build strong customer relationships.
 In the final step, companies reap the rewards of creating superior customer value.
 By creating value for consumers, they in turn capture value from consumers in the
form of sales, profits, and long-term customer equity.
First: Understanding the marketplace and customer needs:
As a first step, marketers need to understand customer needs and wants and the
marketplace in which they operate.

We examine five core customer and marketplace concepts:

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(1) needs, wants, and demands;
(2) market offerings (products, services, and experiences);
(3) value and satisfaction;
(4) exchanges and relationships
(5) markets.

1) Customer Needs, Wants, and Demands

a. The most basic concept underlying marketing is that of human needs.
 Human needs are states of felt deprivation.
 They include basic physical needs for food, clothing, warmth, and safety; social
needs for belonging and affection; and individual needs for knowledge and self-
expression.
 Marketers did not create these needs; they are a basic part of the human makeup.

b. Wants are the form human needs take as they are shaped by culture and individual
personality.

c. When backed by buying power, wants become demands.

 Given their wants and resources, people demand products and services with benefits
that add up to the most value and satisfaction.

2) Consumers’ needs and wants are fulfilled through market offerings

 Market offerings: some combination of products, services, information, or experiences
offered to a market to satisfy a need or a want.
 Market offerings are not limited to physical products.
 They also include services —activities or benefits offered for sale that are essentially
intangible and do not result in the ownership of anything.
 Market offerings also include other entities, such as persons, places, organizations,
information, and ideas.
 Also, 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 suffer from marketing myopia.
 Marketing myopia is defined as the mistake of paying more attention to the
specific products a company offers than to the benefits and experiences produced by
these products.

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3) Customer Value and Satisfaction:
Consumers usually face a broad array of products and services that might satisfy a given
need. How do they choose among these many market offerings?

 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.

 Dissatisfied customers often switch to competitors and disparage the product to

others.

 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.

 Customer value and customer satisfaction are key building blocks for developing and
managing customer relationships.

4) Exchanges and relationships:

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

Exchange is the act of obtaining a desired object from someone by offering something in
return.
 In the broadest sense, the marketer tries to bring about a response to some market
offering.
 The response may be more than simply buying or trading products and services.

 Marketing consists of actions taken to create, maintain, and grow desirable exchange
relationships with target audiences involving a product, service, idea, or other object.
 Companies want to build strong relationships by consistently delivering superior
customer value.
5) Markets The concepts of exchange and relationships lead to the concept of a market.
A market is the set of actual and potential buyers of a product or service.
 These buyers share a particular need or want that can be satisfied through exchange
relationships.

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 Marketing means managing markets to bring about profitable customer relationships.
 However, creating these relationships takes work.
 Sellers must search for and engage buyers, identify their needs, design good market
offerings, set prices for them, promote them, and store and deliver them.
 Activities such as consumer research, product development, communication,
distribution, pricing, and service are core marketing activities.

Second: Designing a Customer Value–Driven Marketing Strategy and Plan

 Once it fully understands consumers and the marketplace, marketing management can
design a customer value–driven marketing strategy.
We define marketing management as the art and science of choosing target markets and
building profitable relationships with them.
 The marketing manager’s aim is to engage, keep, and grow target customers by
creating, delivering, and communicating superior customer value.
 To design a winning marketing strategy, the marketing manager must answer two
important questions:
- What customers will we serve (what’s our target market)?
- And How can we serve these customers best (what’s our value proposition)?
Third & Fourth: Managing customer relationships and capturing customer value
 Customer relationship management is perhaps the most important concept of modern
marketing.
 In the broadest sense, customer relationship management is the overall process of
building and maintaining profitable customer relationships by delivering superior
customer value and satisfaction.
 It deals with all aspects of acquiring, engaging, and growing customers.
Fifth: Capturing Value from Customers
 The first four steps in the marketing process involve engaging customers and building
customer relationships by creating and delivering superior customer value.
 The final step involves capturing value in return in the form of sales, market share and
profits.
 By creating superior customer value, the firm creates satisfied customers who stay loyal
and buy more.
 This, in turn, means greater long-run returns for the firm.

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 Here, we discuss the outcomes of creating customer value: customer loyalty and
retention, share of market and share of customer, and customer equity as follows:

- Creating customer loyalty and retention:

 Keeping customers loyal makes good economic sense.
 Loyal customers spend more and stay around longer. 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.
 This phenomenon is called Customer lifetime value.
 It defined as the value of the entire stream of purchases a customer makes over a
lifetime of patronage.

- Growing share of customer:

 Retaining good customers to capture customer lifetime value, good customer
relationship management can help marketers increase their share of customer—the
share they get of the customer’s purchasing in their product categories.

- Building Customer Equity:

 We can now see the importance of not only acquiring customers but also keeping
and growing them.
 The value of a company comes from the value of its current and future customers.

 Customer relationship management takes a long-term view.

 Companies want to not only create profitable customers but also "own" them for
life, earn a greater share of their purchases, and capture their customer lifetime
value.

 The ultimate aim of customer relationship management is to produce high

customer equity.

Customer equity is the total combined customer lifetime values of all of the company’s
current and potential customers.
Lecture Notes
 If actual value & benefits > expected benefits  delighted customer
 If actual value & benefits = expected benefits  Satisfied customer
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 If actual value & benefits < expected benefits  Dissatisfied customer