Marketing: Marketing: Creating and Capturing Customer Value Chapter 1.

Marketing:Marketing:Creating and Capturing

Customer Value

Chapter 1

Chapter Outline What is Marketing? Understanding the Marketplace and

Customer Needs Designing a Customer-Driven Marketing

Strategy Preparing an Integrated Marketing Plan

and Program Building Customer Relationships Capturing Value from Customers The Changing Marketing Landscape

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1. Define marketing and the marketing process.2. Explain the importance of understanding

customers and identify the five core marketplace concepts.

3. Identify the elements of a customer-driven marketing strategy and discuss the marketing management orientations that guide strategy.

4. Discuss customer relationship management and identify strategies for creating value for and capturing value from customers.

5. Describe the major trends and forces that are changing the marketing landscape.

Previewing the ConceptsPreviewing the Concepts

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What Is Marketing?What Is Marketing?

Simple definition: Marketing is managing profitable customer relationships.

Goals: 1. Attract new customers by promising

superior value. 2. Keep and grow current customers

by delivering satisfaction.

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Marketing DefinedMarketing Defined

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

OLD view of marketing:

Making a sale—“telling and selling”

NEW view of marketing:

Satisfying customer needs

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Figure 1.1:Figure 1.1:

A Simple Model of the A Simple Model of the 5-Step Marketing Process5-Step Marketing Process

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Core ConceptsCore Concepts Marketers must understand

5 core customer & marketplace concepts:– Needs, wants, and demands.– Market offerings.– Value and satisfaction.– Exchanges and relationships.– Markets.

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Needs, Wants, and DemandsNeeds, Wants, and Demands

Needs: State of felt deprivation including physical, social, and individual needs.– Physical, social, and individual needs.

Wants: Form that a human need takes, as shaped by culture and individual personality.

Wants + Buying Power = Demand.

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Needs, Wants, and DemandsNeeds, Wants, and Demands

Types of Needs:Types of Needs:– Physical needs:

• Food, clothing, shelter, safety.

– Social needs:• Belonging, affection.

– Individual needs:• Learning, knowledge,

self-expression.Is ice cream a “need”?

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Market OfferingsMarket Offerings

Some combination of products, Some combination of products, services, information, or services, information, or experiences offered to a market experiences offered to a market to satisfy a need or want.to satisfy a need or want.

Customer needs and wants are fulfilled through market offerings

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Marketing in ActionMarketing in Action

Market offerings are not limited to physical products.

UNCF powerfully markets the idea that “A mind is a terrible thing to waste.”

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Marketing MyopiaMarketing Myopia

Marketing myopia:– Occurs when sellers pay more

attention to the specific products they offer than to the benefits and experiences produced by the products.

– Focusing only on the existing “wants” and losing sight of the underlying consumer “needs.”

Avoiding Marketing Myopia

Marketing Myopia is management’s failure to recognize the scope of its business.– To avoid marketing myopia, companies

must broadly define organizational goals toward consumer needs

– Focus on benefits

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Customer Value and SatisfactionCustomer Value and Satisfaction

Care must be taken when setting expectations for market offerings:– If performance is lower than

expectations, satisfaction is low.– If performance is higher than

expectations, satisfaction is high.

Customer Value and SatisfactionCustomer Value and SatisfactionExpectations

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Marketing in ActionMarketing in Action

Advertising sets expectations, and marketers must be careful not to promise too much.

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Exchanges and RelationshipsExchanges and Relationships

Exchange:– Act of obtaining

a desired object from someone by offering something in return.

What would be exchanged for a vacation?

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Exchanges and RelationshipsExchanges and Relationships Relationships:

– Marketing actions build and maintain relationships with target audiences involving an idea, product, service, or other object.

– Marketers build strong relationships by consistently delivering superior customer value.

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What Is a Market?What Is a Market?

A market:– Is the set of actual and potential

buyers of a product.•These people share a need or want

that can be satisfied through exchange relationships.

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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.–Demographic–Economic–Physical

– Technological– Political-legal– Socio-cultural

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Figure 1.2:Figure 1.2:

A Modern Marketing SystemA Modern Marketing System

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Marketing ManagementMarketing Management

The art and science of choosing target markets and building profitable relationships with them.– Aim is to find, attract, keep, and

grow customers by creating, delivering, and communicating superior value.

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Marketing ManagementMarketing Management

Designing a winning marketing strategy requires answers to the following questions: 1. What customers will we serve?

— What is our target market?2. How can we best serve these

customers? — What is our value proposition?

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Selecting Customers to ServeSelecting Customers to Serve

Market Segmentation:– Dividing the market

into segments of customers.

Market Targeting:– Selecting one or

more segments to cultivate.

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Choosing a Value PropositionChoosing a Value Proposition

The set of benefits or values a company promises to deliver to consumers to satisfy their needs.– Value propositions dictate how firms

will differentiate and position their brands in the marketplace.

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Marketing in ActionMarketing in Action

Many firms are emphasizing the “value” in their value proposition during tough economic times.

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Marketing Management Marketing Management OrientationsOrientations

Organizations design and carry out their marketing strategies under five alternate concepts:– Production Concept.– Product Concept.– Selling Concept.– Marketing Concept.– Societal Marketing Concept.

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Marketing Management Marketing Management OrientationsOrientations

The production concept is the idea that consumers will favor products that are available or highly affordable.

The 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.

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Marketing Management Marketing Management OrientationsOrientations

The selling concept is the idea that consumers will not buy enough of the firm’s products unless it undertakes a large scale selling and promotion effort.

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The Marketing ConceptThe Marketing Concept

The marketing concept:– A marketing management

philosophy that holds that achieving organizational goals depends on knowing the needs and wants of target markets and delivering the desired satisfaction better than competitors.

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Figure 1.3:Figure 1.3:

The Selling and Marketing The Selling and Marketing Concepts ContrastedConcepts Contrasted

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The Societal The Societal Marketing ConceptMarketing Concept

The societal marketing concept:– The idea that a company’s

marketing decisions should consider consumer’s wants, the company’s desires, consumers’ long-run interests and society’s long-run interests.

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Figure 1.4:Figure 1.4:

The Considerations Underlying the The Considerations Underlying the Societal Marketing ConceptSocietal Marketing Concept

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Marketing in ActionMarketing in Action Johnson & Johnson’s credo stresses putting people before profits—the societal marketing concept in action.

Visit The Body Shop’s Web site for another example of a firm which practices the societal marketing concept.

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The Integrated Marketing PlanThe Integrated Marketing Plan

Transforms the marketing strategy into action.

Includes the marketing mix and 4 Ps of marketing:– Product.– Price.– Place (Distribution).– Promotion.

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Customer Relationship Customer Relationship ManagementManagement

The overall process of building and The overall process of building and maintaining profitable customer maintaining profitable customer relationships by delivering superior relationships by delivering superior customer value and satisfaction.customer value and satisfaction.

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Building Customer RelationshipsBuilding Customer Relationships

Customer relationship management (CRM):– Deals with all aspects of acquiring,

keeping, and growing customers.– Customer value and satisfaction are

key.

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Customer Perceived ValueCustomer Perceived Value

Customer’s evaluation of the Customer’s evaluation of the difference between all of the difference between all of the benefits and all of the costs of benefits and all of the costs of a marketing offer relative to a marketing offer relative to those of competing offers.those of competing offers.

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Customer Perceived ValueCustomer Perceived Value

Customer perceived value:– Perceptions may

be subjective.– To some

customers “value” might mean paying more to get more.

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Customer SatisfactionCustomer Satisfaction

Extent to which the Extent to which the product’s perceived product’s perceived performance matches performance matches a buyer’s expectations.a buyer’s expectations.

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Customer SatisfactionCustomer Satisfaction

Customer satisfaction:– High levels of customer

satisfaction often leads to consumer loyalty.

– Some firms seek to DELIGHT customers by exceeding expectations.

– Profitability must be considered.

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Customer RelationshipsCustomer Relationships

Firms may choose to build relationships at different levels.

Loyalty and retention programs build relationships and may include:– Frequency marketing programs.– Club marketing programs.

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Changing Nature of RelationshipsChanging Nature of Relationships

Customer profitability analysis eliminates losing customers and selects profitable ones with whom relationships should be developed.

American Express attempted to weed out unprofitable customers by offering them $300 in exchange for paying off their balances and closing their accounts.

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Changing Nature of RelationshipsChanging Nature of Relationships

Firms now relate more deeply and interactively via blogs, social network Web sites, email, and video sharing.

Embracing customer-managed relationships requires marketing via attraction rather than intrusion.

Consumer-generated marketing has become a significant marketing force.

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Marketing in ActionMarketing in Action

H.J. Heinz attempted to harness consumer-generated marketing and received 8,000 entries in a homemade ad contest for its ketchup brand on YouTube.

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Partner Relationship ManagementPartner Relationship Management

Marketing partners help create customer value and assist in building customer relationships.

Partners inside the firm:– Cross-functional customer teams.

Partners outside the firm:– Supply chain management.

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Capturing Value From CustomersCapturing Value From Customers

Value is captured from customers via current and future sales, market share and profit.– Superior customer value leads to highly

satisfied loyal customers who buy more.– Key outcomes of customer value include

customer loyalty and retention, share of market, share of customer, and customer equity.

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Capturing Value From CustomersCapturing Value From Customers

Customer lifetime value– The value of the entire stream of

purchases that the customer would make over a lifetime of patronage.

Share of customer– The portion of the customer’s

purchasing that a company gets in their product categories.

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Customer EquityCustomer Equity

The total combined customer lifetime values of all the company’s current and potential customers.

Manage equity by:– Classifying customers by projected

loyalty and potential profitability.– Manage each group accordingly.

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Figure 1.5:Figure 1.5:

Customer Relationship GroupsCustomer Relationship Groups

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Changing Marketing LandscapeChanging Marketing Landscape

The uncertain economic environment.

The digital age. Rapid globalization. Sustainable marketing – call for more

social responsibility. Growth of not-for-profit marketing.

So, What Is Marketing? Pulling It All Together

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1. Define marketing and the marketing process.2. Explain the importance of understanding

customers and identify the five core marketplace concepts.

3. Identify the elements of a customer-driven marketing strategy and discuss the marketing management orientations that guide strategy.

4. Discuss customer relationship management and identify strategies for creating value for and capturing value from customers.

5. Describe the major trends and forces that are changing the marketing landscape.

Reviewing the ConceptsReviewing the Concepts