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Chapter One Creating and Capturing Customer Value Copyright © 2009 Pearson Education, Inc. Publishing as Prentice Hall Chapter 1- slide 1 What Is Marketing? Marketing is a process by which companies create value for customers and build strong customer relationships to capture value from customers in return Copyright © 2010 Pearson Education, Inc. Publishing as Prentice Hall Chapter 1- slide 2 What Is Marketing? The Marketing Process Copyright © 2010 Pearson Education, Inc. Publishing as Prentice Hall Chapter 1- slide 3 Understanding the Marketplace and Customer Needs Customer Needs, Wants, and Demands Needs • States of deprivation • Physical—food, clothing, warmth, safety • Social—belonging and affection • Individual—knowledge and self-expression Wants • Form that needs take as they are shaped by culture and individual personality Demands • Wants backed by buying power Copyright © 2010 Pearson Education, Inc. Publishing as Prentice Hall Chapter 1- slide 4 Understanding the Marketplace and Customer Needs • Market offerings are some combination of products, services, information, or experiences offered to a market to satisfy a need or want • Marketing myopia is focusing only on existing wants and losing sight of underlying consumer needs Copyright © 2010 Pearson Education, Inc. Publishing as Prentice Hall Chapter 1- slide 5 Understanding the Marketplace and Customer Needs Customer Value and Satisfaction Expectations Customers • Value and satisfaction Marketers • Set the right level of expectations • Not too high or low Copyright © 2010 Pearson Education, Inc. Publishing as Prentice Hall Chapter 1- slide 6 Understanding the Marketplace and Customer Needs Exchange is the act of obtaining a desired object from someone by offering something in return Copyright © 2010 Pearson Education, Inc. Publishing as Prentice Hall Chapter 1- slide 7 Understanding the Marketplace and Customer Needs Markets are the set of actual and potential buyers of a product Copyright © 2010 Pearson Education, Inc. Publishing as Prentice Hall Chapter 1- slide 8 Market Market - buyers who share a particular need or want that can be satisfied by a company’s products or services. Copyright © 2010 Pearson Education, Inc. Publishing as Prentice Hall Actual Buyers Potential Buyers Chapter 1- slide 9 Designing a Customer-Driven Marketing Strategy Selecting Customers to Serve Demarketing is marketing to reduce demand temporarily or permanently; the aim is not to destroy demand but to reduce or shift it Copyright © 2010 Pearson Education, Inc. Publishing as Prentice Hall Chapter 1- slide 10 Designing a Customer-Driven Marketing Strategy Marketing Management Orientations Production concept Product concept Copyright © 2010 Pearson Education, Inc. Publishing as Prentice Hall Selling concept Marketing concept Societal concept Chapter 1- slide 11 Designing a Customer-Driven Marketing Strategy Marketing Management Orientations • Value Proposition: A company’s value proposition is the set of benefits or values it promises to deliver to consumers to satisfy their needs. Copyright © 2010 Pearson Education, Inc. Publishing as Prentice Hall Chapter 1- slide 12 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 Copyright © 2010 Pearson Education, Inc. Publishing as Prentice Hall Chapter 1- slide 13 Designing a Customer-Driven Marketing Strategy Marketing Management Orientations Product concept is the idea that consumers will favor products that offer the most quality, performance, and features. Organization should therefore devote its energy to making continuous product improvements. Copyright © 2010 Pearson Education, Inc. Publishing as Prentice Hall Chapter 1- slide 14 Designing a Customer-Driven Marketing Strategy Marketing Management Orientations 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 Copyright © 2010 Pearson Education, Inc. Publishing as Prentice Hall Chapter 1- slide 15 Designing a Customer-Driven Marketing Strategy Marketing Management Orientations 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 Copyright © 2010 Pearson Education, Inc. competitors do Chapter 1- slide 16 Publishing as Prentice Hall Contrast between Sales Concept & Marketing Concept Starting Point Factory Focus Products Means Ends Selling &Promoting Profits through sales volume a. THE SELLING CONCEPT Target Customer Integrated Market Needs Marketing Profits through customer satisfaction b. THE MARKETING CONCEPT Copyright © 2010 Pearson Education, Inc. Publishing as Prentice Hall Chapter 1- slide 17 Designing a Customer-Driven Marketing Strategy Marketing Management Orientations Societal marketing concept is the idea that a company should make good marketing decisions by considering consumers’ wants, the company’s requirements, consumers’ long-term interests, and society’s long-run interests Copyright © 2010 Pearson Education, Inc. Publishing as Prentice Hall Chapter 1- slide 18 Designing a Customer-Driven Marketing Strategy Copyright © 2010 Pearson Education, Inc. Publishing as Prentice Hall Chapter 1- slide 19 Integrated Marketing Plan & Program Copyright © 2010 Pearson Education, Inc. Publishing as Prentice Hall Chapter 1- slide 20 4Ps of Marketing 4Pss Provide Four Cs of Marketing Customer solution (Product) Customer cost (Price) Convenience (Placement) Communication (Promotion) Copyright © 2010 Pearson Education, Inc. Publishing as Prentice Hall Chapter 1- slide 21 Building Customer Relationships Customer Relationship Management (CRM) • The overall process of building and maintaining profitable customer relationships by delivering superior customer value and satisfaction. • Customer Perceived Value: The customers evaluation of the difference between all the benefits & all the costs of a market offering relative to those of competing products. Copyright © 2010 Pearson Education, Inc. Publishing as Prentice Hall Chapter 1- slide 22 Building Customer Relationships • Customer Satisfaction depends on a product’s perceived performance relative to a buyer’s expectations. Performance = Expectation Customer Satisfaction= Customer Loyalty= Better Performance • Customer delight- promising only what a company can deliver, & then delivering more than promised. Copyright © 2010 Pearson Education, Inc. Publishing as Prentice Hall Chapter 1- slide 23 Changing Nature of Customer Relationships • Relating with More Carefully selected Customers: - Selective Relationship Management Weeding out losing customers & targeting & pampering winning ones • Relating More Deeply and Interactively: New Technologies have profoundly changed the ways in which people relate to one another. Using direct marketing tools such as telephone, mail order catalogs Eg Dell & Amazon. Copyright © 2010 Pearson Education, Inc. Publishing as Prentice Hall Chapter 1- slide 24 Changing Nature of Customer Relationships • Consumer-Generated Marketing: Marketing messages, ads, and other brand exchanges created by consumer themselves. Copyright © 2010 Pearson Education, Inc. Publishing as Prentice Hall Chapter 1- slide 25 Partner Relationship Management • Partners Inside the company. • Marketing Partners Outside the firm. Copyright © 2010 Pearson Education, Inc. Publishing as Prentice Hall Chapter 1- slide 26 Creating Customer Loyalty & Retention “ losing customers does not mean losing a single sale but in fact losing the entire stream of purchases that the customer would make over a lifetime”. • Customer lifetime value: The value of the entire stream of purchases that a customer would make over a lifetime of patronage. Copyright © 2010 Pearson Education, Inc. Publishing as Prentice Hall Chapter 1- slide 27 Customer Equity • Companies should not just acquire customers, but keep & grow them as well. • The ultimate aim of customer relationship management is to produce high customer equity. • Customer Equity is the combined customer lifetime values of all the company’s current & potential customers. • It is a better measure of a firms performance than current sales or market share. More Loyal firm’s Profitable customers Copyright © 2010 Pearson Education, Inc. Publishing as Prentice Hall = Higher firm’s Customer Equity Chapter 1- slide 28 Building Right relationships with Right customers Which customers should the company acquire & retain? • The company can classify customers according to their potential profitability & projected loyalty manage its relationships with them accordingly. Copyright © 2010 Pearson Education, Inc. Publishing as Prentice Hall Chapter 1- slide 29 Customer Relationship Groups • • • • Strangers …. Butterflies …. True Friends …. Barnacles …. Low profitability/ Less Loyal. Profitable/ not Loyal Profitable/ Loyal Not Profitable/ Highly Loyal • Different types of customers require different relationship strategies, therefore goal is to : Copyright © 2010 Pearson Education, Inc. Publishing as Prentice Hall Chapter 1- slide 30 Customer Relationship Groups High Profitability Low Butterflies True Friends Good fit between company’s offerings & customer needs; Good fit between company’s offerings & customer needs; High profit potential Strangers Little fit between company’s Profitability offerings & customer needs; Lowest profit potential Short- term customers Copyright © 2010 Pearson Education, Inc. Publishing as Prentice Hall Highest profit potential Barnacles Limited fit between company’s offerings & customer needs; Low profit potential Long-term customers Projected Loyalty Chapter 1- slide 31