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Chapter 1
Marketing: Managing
Profitable Customer
Relationships
1
Concept Connections
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Define marketing and the steps in the marketing
process.
Explain the core marketing concepts.
Define marketing management and examine how
marketers manage demand and build profitable
customer relationships.
Compare the five marketing management
philosophies.
Capturing value from customer.
Jian Hong SHAO USTB
What is Marketing?
Process by which individuals and
groups obtain what they need and
want through creating and
exchanging products and value
with others.
Simply put: Marketing is the delivery
of customer satisfaction at a profit.
Jian Hong SHAO USTB
The Marketing Process
Create value for customers and
build customer relationships
Understand the
marketplace and
customer needs
and wants
Design a
customer-driven
marketing
strategy
Construct a
marketing program
that delivers
superior value
Capture value from
customers in return
Build profitable
relationships and
create
customer delight
Capture value from
customers to
create profits and
customer equity
Jian Hong SHAO USTB
1 Understanding the
Marketplace
and Consumer Needs
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Core Marketing Concepts
Needs, wants,
and demands
Markets
Exchange,
transactions,
and relationships
Products
and services
Value,
satisfaction,
and quality
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Needs, Wants and
Demands?
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Needs - state of
felt deprivation for
basic items. Such as
food and clothing,
and complex needs
such as for belonging.
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Needs, Wants and
Demands?
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Wants - form
that a human
need takes as
shaped by culture
and individual
personality.
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Needs, Wants and
Demands ?
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Demands - human wants backed
by buying power.
Wants
Buying Power
“Demands”
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What Will Satisfy
Consumer’s Needs & Wants?
Products
Anything that can be Offered to a Market to Satisfy a Need or Want
Experiences
Persons
Places
Organizations
Information
Ideas
Services
Activities or Benefits Offered for Sale That Are Essentially
Intangible and Don’t Result in the Ownership of Anything
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How Do Consumers Choose
Products and Services?
Value Gained From Owning a Product
and Costs of Obtaining the Product is
Customer Value
Product’s Perceived Performance in Delivering Value
Relative to Buyer’s Expectations is
Customer Satisfaction
Total Quality Management Involves
Improving the Quality of Products, Services, and
Marketing Processes
Jian Hong SHAO USTB
Value & Satisfaction
If performance is lower than expectations,
satisfaction is low
 If performance is higher than expectations,
satisfaction is high
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Expectation
8
Performance
10
Expectation
10
Performance
8
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Quality
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Quality has a direct impact on product /
service and performance, therefore it is
closely tied to customer value and
satisfaction
The aim of today’s Total Quality
Management is total customer
satisfaction
Jian Hong SHAO USTB
How Do Consumers Obtain
Products and Services?
Exchanges
Transactions
Relationships
Building a Marketing
Network Consisting of
The Company and All
Its Supporting
Stakeholders
Jian Hong SHAO USTB
Who Purchases Products
and Services?
Resources to
Exchange
Willingness to
Exchange
Market –
Ethical
Buyers who
share a
particular need
or want that
canAttitudes
be satisfied
through
of
Others or
exchange
relationships.
Unexpected
Situational
Factors
People Who
Exhibit Need
Actual
Buyers
Potential
Buyers
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Modern Marketing System
Competitors
Company
(Marketer)
Marketing
Intermediaries
End User
Market
Environment
Environment
Suppliers
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2. Designing a
Customer-Driven
Marketing Strategy
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Marketing Management
Marketing
Management
Demand
Management
The art and
Science of
Choosing target
Markets &
Building
profitable
Relationships.
Finding and
increasing
demand, also
changing or
reducing
demand such
as in
Demarketing
Profitable
Customer
Relationships
Attracting new
customers and
retaining and
building
relationships
with current
customers
Jian Hong SHAO USTB
Marketing Management
Philosophies
Production Concept
Product Concept
Selling Concept
Marketing Concept
•Consumers favor products that are
available and highly affordable.
•Consumers favor products that offer
the most quality, performance, and
innovative features.
•Consumers will buy products only if
the company promotes/ sells these
products.
•Focuses on needs/ wants of target
markets & delivering satisfaction
better than competitors.
of target
Societal Marketing Concept •Focuses on needs/ wants
Jian Hong SHAO
USTB
markets & delivering superior value.
Marketing and Sales
Concepts Contrasted
Starting
Point
Focus
Factory
Existing
Products
Means
Ends
Selling
and
Promoting
Profits
through
Volume
The Selling Concept
Market
Customer
Needs
Integrated
Marketing
Profits
through
Satisfaction
The Marketing Concept
Jian Hong SHAO USTB
Societal Marketing
Concept
Society
(Human Welfare)
Societal
Marketing
Concept
Consumers
(Want Satisfaction)
Company
(Profits)
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3. Preparing a Marketing
Plan and Program
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The Marketing Mix
PRODUCT
PRICE
TARGET
CUSTOMERS - needs
DISTRIBUTION
PROMOTION
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The 4 P’s & 4 C’s of the
Marketing Mix
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4 P’s - Seller’s
View
Product
 Price
 Place
 Promotion
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4 C’s - Buyer’s
View
Customer Solution
 Customer Cost
 Convenience
 Communication
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4. Building Customer
Relationships
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Customer Relationship
Management
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The process of
building and
maintaining
profitable customer
relationships by
delivering superior
customer value and
satisfaction.
Jian Hong SHAO USTB
Partner Relationship
Marketing
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Connecting Inside
the Company
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Every employee
must be customerfocused
Teams coordinate
efforts toward
customers
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Connecting
With Outside
Partners
Supply Chain
Management
 Strategic
Alliances
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Jian Hong SHAO USTB
5. Capturing Value from
Customers
Jian Hong SHAO USTB
Satisfaction

Satisfaction is . . .
“a person’s feelings of
pleasure resulting from
comparing a product’s
perceived performance (or
outcome) in relation to his or
her expectations.”
Jian Hong SHAO USTB
Customer Loyalty &
Retention
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Loyalty is a deeply held
commitment to rebuy or
repatronize a preferred
product or service in the
future despite situational
influences.
Show Behavioral &
Psychological Commitments
Jian Hong SHAO USTB
A Loyal Customer is one
Who…
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Show Behavioral Commitment
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Buys from one supplier (sole loyalty) frequently
Buys a large proportion, increasingly buys more
Provides constructive feedback/suggestions
Exhibits Psychological Commitment
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Commitment-doesn’t consider terminating the
relationship
Has a positive attitude toward provider
Say good things about provider
Resist changing despite competitors’ persuasion
Willing to forgive mistakes
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Benefits for Increasing
Customer Loyalty
Reduced sales and
marketing costs
 Lower transaction costs
 Increase in sales
 Less price competition
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Customer Loyalty &
Retention
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Customer Lifetime Value
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The entire stream of
purchases that the customer
would make over a lifetime of
patronage.
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Share of Customer
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The share a company
gets of the customers
purchasing in their
product categories.
Jian Hong SHAO USTB
Customer Relationship
Groups
Jian Hong SHAO USTB
New Marketing Landscape
Learn About &
Track Customers
With Databases
Create Products &
Services Tailored to
Meet Customer Needs
Connecting Technologies in
Computers,
Telecommunications,
Information, & Transportation
Communicate With
Customers in Groups
Or One-on-One
Distribute Products
More Efficiently &
Effectively
Jian Hong SHAO USTB
The Internet
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The Internet has been hailed as the technology
behind a new model for doing business.
New applications include:
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Internet – connecting with customers
Intranets – connecting with others in the company
Extranets – connecting with strategic partners,
suppliers, and dealers.
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Purchasing will be over $2.3 trillion in 2006.
Jian Hong SHAO USTB
Connections With
Customers
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Most marketers are targeting
fewer, potentially more profitable
customers.
Asking:
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What value does the customer
bring to the organization?
Are they worth pursuing?
Focus has shifted to:
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keeping current customers
building lasting relationships
based on superior satisfaction
Jian Hong SHAO USTB
and value.
New Marketing Landscape
Rapid Globalization
Not-for-Profit
Marketing
Ethics & Social
Responsibility
New World of Marketing
Relationships
Jian Hong SHAO USTB
The Marketing Process
Jian Hong SHAO USTB
Review of Concept
Connections





Define marketing and the steps in the
marketing process.
Explain the core marketing concepts.
Define marketing management and
examine how marketers manage demand
and build profitable customer relationships.
Compare the five marketing management
philosophies.
Capturing value from customer.
Jian Hong SHAO USTB