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Kotler, Armstrong
Principles of Marketing 4e
Session 2 and Chapter 1
Marketing: Creating Customer
Value and Satisfaction, Profitably
Agenda
• Revision on Session 2
• Identify core activities, customer base,
business values and direction
• The marketing process
• Understanding the market and customer
needs
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Philip Kotler (the author)
• Philip Kotler is an American
academic focused on marketing
• The author of Marketing Management
among dozens of other textbooks
and books, he is the S.C. Johnson &
Son Distinguished Professor of International
Marketing at the Kellogg School of Management
at Northwestern University
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Chapter Objectives
1. Define marketing, employing such key elements as
value, customer relationships, needs, wants and
demands
2. Discuss marketing management and elaborate on
the basic ideas of demand management and
building profitable customer relationships
3. List the marketing management philosophies and
be able to distinguish between them.
4. Analyse the key marketing challenges of this
century and reflect on the ways these might be
overcome
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What Is Marketing?
• An activity, set of institutions and
processes for creating, communicating,
delivering and exchanging offerings that
have value for customers, clients, partners
and society at large
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The Marketing Process
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Selling and Promotion are:
A. are synonymous with the term marketing
B. are only the tip of the marketing iceberg
C. are the most important marketing
functions
D. are the least important marketing
functions
E. are not part of marketing
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Understanding the Marketplace
and Customer Needs
• Marketers need to understand customer
needs, wants and demands and the
marketplace within which they operate
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Needs, Wants and Demands (1)
• Human needs are the most basic
concept underlying marketing.
– Humans have many complex needs
including physical, social and individual
needs
– Marketers stimulate rather than create
these needs, they are part of human
make up
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Needs, Wants and Demands (2)
– When a need is not satisfied, a person will
either try to reduce the need or look for an
object that will satisfy it
– People in less economically developed
societies might try to reduce their desires and
satisfy them with what is available
– People in industrial societies might try to
develop objects that will satisfy their needs
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Needs, Wants and Demands (3)
• Wants are the form taken by human
needs and are shaped by culture and
individual personality.
– For example, a hungry person in Australia,
Singapore or Hong Kong might want
something different for lunch from a hungry
person in the South Pacific
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Needs, Wants and Demands (4)
– As a society evolves, the wants of its
members expand
– Marketers try to provide more want-satisfying
goods and services
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Needs, Wants and Demands (5)
• Demands are the human wants that are backed
up by buying power
– Customers view products as bundles of
benefits and choose the products that give
them the best bundle for their money
– Outstanding companies go to great lengths to
learn about and understand their customers’
needs, wants and demands
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Needs, Wants and Demands (6)
– They conduct customer research,
analyse and monitor customer
behaviour, complaints, inquiry, warranty
and service performance data
– Understanding customer needs, wants,
and demands in detail provides
important input for designing marketing
strategies
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Wants supported by buying power is
best described as a(n):
A.
B.
C.
D.
E.
need
desire
demand
exchange
manifestation of greed
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Market Offerings: Goods, Services
and Experiences
• A market offering is a product that is some
combination of goods, services and experiences
that can be offered to a market to satisfy a need
or want
• A product includes physical objects, services,
persons, places, ideas and organisations
• Anything that satisfies a need can be called a
product
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Market Offerings: Goods, Services
and Experiences (2)
• Marketers often use the expression goods
and services to distinguish between
tangible and intangible ones
• However these should be viewed as
continuum and not as a basic dichotomy
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Customer Perceived Value and
Satisfaction
• Customer perceived value is the difference
between the values the customer gains in
owning and using a product and the costs of
obtaining the product
• Customer Satisfaction is the extent to which a
product’s perceived performance matches a
buyer’s expectations
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Exchange, Transactions and
Relationships (1)
• Exchange is the act of obtaining a desired object
from someone by offering something in return
• Exchange means that people do not need to
prey on others, depend on donations or possess
the skills to produce every necessity for
themselves
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Exchange, Transactions and
Relationships (2)
• Exchange is the core concept of marketing. For
an exchange to take place, several conditions
must be satisfied:
• At least two parties must participate and each
must have something of value to the other
• Each party must want to deal with the other
and be free to accept or reject an offer
• Each party must be able to communicate and
deliver
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Exchange, Transactions and
Relationships (3)
• A transaction is marketing’s unit of
measurement
• A transaction consists of a trade of value
between two parties
• In transactions it must be possible to state
that what each party is giving and gaining
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Exchange, Transactions and
Relationships (3)
• Relationship marketing is the process of
creating, maintaining and enhancing
strong, value-laden relationships with
customers and other stakeholders
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Markets
• Market - A set of all actual and
potential buyers of a product
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A Simple Marketing System
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Marketing
• Marketing means managing markets to
bring about exchanges for the purpose of
satisfying human needs and wants
• Marketing is carried out by both sellers
and buyers, and company purchasing
agents
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Elements of a Modern Marketing
System
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Designing a Customer-Driven
Marketing Strategy
• Marketing management is:
The analysis, planning, implementation and
control of programs designed to create,
communicate and deliver value to customers
and facilitate managing customer
relationships in ways that enable the
organisation to meet its objectives and those
of its stakeholders
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A Customer-Driven Marketing
Strategy
• A winning marketing strategy asks ‘what
customers will we serve?’ and ‘Who is our
target market?
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Selecting Customers to Serve
• Marketers cannot serve all customers in
every way with a single market offering
• It is necessary to select customers that
can be served well and profitably
• De-marketing is marketing in which the
task is to temporarily or permanently
reduce demand
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Selecting Customers to Serve
• Managing demand means managing
customers who come from two groups:
new and repeat customers
• Keeping existing customers is important
as the cost to attract new customers is five
times as much
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Selecting Customers to Serve
• Marketers retain customers by ensuring that
branded goods, services and experiences offer
intrinsic value and that there is a sense of
excitement or enjoyment associated with the
marketing offering and communication used
• Context is important - excitement is not always
appropriate
• The key to offering excitement is involvement
and interactivity
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Emotional Engagement
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Choosing a Value Proposition
• The organisation must decide how it will
serve targeted customers - how it will
differentiate and position itself in the
marketplace
• A value proposition is the set of benefits or
values it promises to deliver to consumers
to satisfy their needs
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Marketing Management Orientations (1)
• The Production Concept
– Consumers favour products that are
available and highly affordable
• The Product Concept
– Consumers favour products that offer
the most quality, performance and
innovative features
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Marketing Management Orientations (2)
• The Selling Concept
– Consumers won’t buy enough of
the organisation’s products unless
the organisations undertakes a large-scale
selling and promotion effort
• The Marketing Concept
– Achieving organisational goals depends on
determining the needs and wants of target
markets and delivering the desired
satisfaction more effectively and efficiently
than competitors
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Societal Marketing
• Organisations should determine the
needs, wants and interests of target
markets and deliver the desired
satisfaction more effectively and efficiently
than competitors in a way that maintains
or improves the customer’s and society’s
well-being
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Considerations Underlying the
Societal Marketing Concept
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Preparing an Integrated Marketing
Program
• The company’s marketing strategy outlines
which customers the company will serve and
how it will create value
• The integrated marketing program is developed
to actually deliver the value to target customers
• The program builds relationships by
transforming the strategy into action, it consists
of the marketing mix
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The Extended Marketing Mix
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Building Customer Relationships
• The first three steps in the marketing
process:
1. Understanding the marketplace and
customer needs (research)
2. Designing a customer-driven strategy
3. Marketing programs lead to the most
important step: Building profitable
customer relationships
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Customer Relationship Management
(CRM)
• CRM is the overall process of building and
maintaining profitable customer relationships
by delivering superior customer value and
satisfaction
• CRM deals with all aspects of acquiring,
keeping and growing customers
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Relationship Building Blocks:
Customer Value and Satisfaction
• The key to building long lasting relations is
to create superior customer value and
satisfaction.
1. Customer Perceived Value is the
evaluation of the difference between
the benefits and all the costs of a
market offering relative to those of
competing offers
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Relationship Building Blocks:
Customer Value and Satisfaction (2)
2. Customer Satisfaction depends on the product’s
perceived performance matches a buyer’s
expectations
3. If the product’s performance falls short of
expectations, the buyer is dissatisfied
4. If the performance matches or exceeds
expectations, the buyer is satisfied or delighted
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The Changing Nature of Customer
Relationships
• Companies are building more direct and lasting
relationships with more carefully selected
customers
1. Companies now use customer profitability
analysis to identify losing customers and
relate to winning customers (selective
relationship management)
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The Changing Nature of Customer
Relationships (2)
2. CRM is used to retain current customers and
build long term relationships with them
3. Companies aim to connect more deeply with
customers and more directly
4. Direct marketing is booming
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Direct Marketing
• The practice of delivering promotional
messages directly to potential customers
on an individual basis as opposed to
through a mass medium e.g.
telemarketing, emails, texts, online display
ads, flyers etc
• Mass media is a means of public
communication reaching a large audience
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Capturing Value from Customers
• Creating Customer Loyalty and Retention
– Good CRM creates customer delight
– Delighted customers remain loyal and talk
favourably about the company.
• Growing Share of Customer
– Good CRM can help marketers to increase their
share of customer
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Capturing Value from Customers (2)
• Building Customer Equity
– This is the combined discounted customer
lifetime values of all the company’s current and
potential customers
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Building the Right Relationship with the Right
Customers
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The New Marketing Landscape
• Marketing operates within a dynamic global
environment
• Rapid changes can quickly make a winning
strategy out of date
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The New Marketing Landscape (2)
• Today’s companies deal with changing customer
values and orientations
• market maturity in many industries, movement of
manufacturing to least cost countries
• environmental degradation
• increased global competition, and many other
economic, political and social problems
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The New Marketing Landscape (3)
• Problems can also become marketing
opportunities
• New trends include:
 growth of not for profit marketing
 rapid globalisation
 IT
changing world economy
 the call for more socially responsible actions
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The New Marketing Landscape
• The growth of not-for-profit marketing:
– Including philanthropic organisations,
universities, hospitals, museums,
symphony orchestras and even
churches
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The New Marketing Landscape
• Rapid Globalisation:
– Most marketing organisations are touched by
global competition
• Customer Information and Digital Marketing:
– The IT explosion is accelerating the rate if change
and emergence of global competitors
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The New Marketing Landscape
• The changing world economy:
– Many countries have grown poorer; around the
world people’s needs are greater but many lack
the means to pay for necessary goods
• The call for more ethical behaviour and social
responsibility:
– There is an increased call for companies to take
responsibility for the social and environmental
impact of their actions
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Next session
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•
•
•
Revision Q&A
Activity – Stranded on an Island
Strategic Marketing
See you tomorrow at 5pm
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