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Marketing - Creating and Capturing Customer Value Chapter 1 Rest Stop: Previewing the Concepts • Define marketing and outline the steps in the marketing process • Explain the importance of understanding customers and the marketplace and identify the five core marketplace concepts • Identify the key elements of a customerdriven marketing strategy Copyright 2013, Pearson Education Inc., Publishing as Prentice-Hall 1-2 Rest Stop: Previewing the Concepts • Discuss customer relationship management and identify strategies for creating value for customers and capturing value from customers in return • Describe the major trends and forces that are changing the marketing landscape in this age of relationships Copyright 2013, Pearson Education Inc., Publishing as Prentice-Hall 1-3 First Stop: JetBlue: A Deep Passion for Creating Customer Value and Relationships • Goal - Creating first-rate, customer-satisfying experiences • Customer-centric - Basic amenities that exceed customer expectations, more legroom, free snacks, free Wi-Fi in terminals, and entertainment systems for every seat • Results - High customer loyalty scores, high customer recommendations, record revenues of $3.8 billion Copyright 2013, Pearson Education Inc., Publishing as Prentice-Hall 1-4 What Is Marketing? • The process by which companies create value for customers and build strong customer relationships in order to capture value from customers in return • Goals • Attract new customers by promising superior value • Keep and grow current customers by delivering satisfaction Copyright 2013, Pearson Education Inc., Publishing as Prentice-Hall 1-5 Making a sale— “telling and selling” NEW view of marketing OLD view of marketing Marketing Satisfying customer needs Copyright 2013, Pearson Education Inc., Publishing as Prentice-Hall 1-6 Figure 1.1 - A Simple Model of the Marketing Process Copyright 2013, Pearson Education Inc., Publishing as Prentice-Hall 1-7 Understanding the Marketplace and Customer Needs • Marketers must understand five core customer and marketplace concepts: • Needs, wants, and demands • Market offerings ( products , services , and experiences ) • Value and satisfaction • Exchanges and relationships • Markets Copyright 2013, Pearson Education Inc., Publishing as Prentice-Hall 1-8 Needs • States of felt deprivation Wants • The form human needs take as they are shaped by culture and individual personality Demands • Human wants that are backed up by buying power Copyright 2013, Pearson Education Inc., Publishing as Prentice-Hall 1-9 Customer Needs, Wants, and Demands • Types of needs • Physical needs • Food, clothing, warmth, and safety • Social needs • Belonging and affection • Individual needs • Learning, knowledge, and self-expression Copyright 2013, Pearson Education Inc., Publishing as Prentice-Hall 1-10 Market Offerings— Products, Services, and Experiences • Some combination of products, services, information, or experiences offered to a market to satisfy a need or want Copyright 2013, Pearson Education Inc., Publishing as Prentice-Hall 1-11 Market Offerings—Products, Services, and Experiences • Not limited to physical products • Include entities such as persons , places , organizations, information, and ideas The U.S. Forest Service markets the idea of reconnecting young people with exploring the joys of nature firsthand Copyright 2013, Pearson Education Inc., Publishing as Prentice-Hall 1-12 Marketing Myopia • The mistake of paying more attention to the specific products a company offers than to the benefits and experiences produced by these products Copyright 2013, Pearson Education Inc., Publishing as Prentice-Hall 1-13 Customer Value and Satisfaction • Customers form expectations about the value and satisfaction that various market offerings will deliver • If marketers set expectations too low, they may satisfy those who buy but fail to attract enough buyers • If marketers set expectations too high, buyers will be disappointed Copyright 2013, Pearson Education Inc., Publishing as Prentice-Hall 1-14 Exchanges and Relationships • Exchange: The act of obtaining a desired object from someone by offering something in return • Relationships • Marketing actions build and maintain exchange relationships with target audiences involving an idea, product, service, or other object • Marketers build strong relationships by consistently delivering superior customer value Copyright 2013, Pearson Education Inc., Publishing as Prentice-Hall 1-15 Markets • The set of all actual and potential buyers of a product or service Copyright 2013, Pearson Education Inc., Publishing as Prentice-Hall 1-16 Figure 1.2 - A Modern Marketing System Copyright 2013, Pearson Education Inc., Publishing as Prentice-Hall 1-17 Designing a Customer-Driven Marketing Strategy • Designing a winning marketing strategy requires answers to the following questions: • What customers will we serve (what’s our target market)? • How can we serve these customers best (what’s our value proposition)? Copyright 2013, Pearson Education Inc., Publishing as Prentice-Hall 1-18 Marketing Management • The art and science of choosing target markets and building profitable relationships with them Copyright 2013, Pearson Education Inc., Publishing as Prentice-Hall 1-19 Selecting Customers to Serve • Market segmentation - Dividing the market into segments of customers • Target marketing - Selecting one or more segments to cultivate Copyright 2013, Pearson Education Inc., Publishing as Prentice-Hall 1-20 Choosing a Value Proposition • Value proposition: The set of benefits or values a company promises to deliver to consumers to satisfy their needs The smart car is positioned as compact, yet comfortable; agile, yet economical; and safe, yet ecological. Copyright 2013, Pearson Education Inc., Publishing as Prentice-Hall 1-21 Marketing Management Orientations • Organizations design and carry out their marketing strategies under five alternate concepts: • • • • • Production concept Product concept Selling concept Marketing concept Societal Marketing concept Copyright 2013, Pearson Education Inc., Publishing as Prentice-Hall 1-22 The Production Concept • Consumers will favor products that are available and highly affordable • The organization should focus on improving production and distribution efficiency Copyright 2013, Pearson Education Inc., Publishing as Prentice-Hall 1-23 The Product Concept • Consumers will favor products that offer the most quality, performance, and features • The organization should devote its energy to making continuous product improvements Copyright 2013, Pearson Education Inc., Publishing as Prentice-Hall 1-24 The Selling Concept • Consumers will not buy enough of the firm’s products unless the firm undertakes a largescale selling and promotion effort Copyright 2013, Pearson Education Inc., Publishing as Prentice-Hall 1-25 The Marketing Concept • Achieving organizational goals depends on knowing the needs and wants of target markets and delivering the desired satisfactions better than competitors do Copyright 2013, Pearson Education Inc., Publishing as Prentice-Hall 1-26 Figure 1.3 - The Selling and Marketing Concepts Contrasted Copyright 2013, Pearson Education Inc., Publishing as Prentice-Hall 1-27 1-27 The Societal Marketing Concept • A company’s marketing decisions should consider consumer’s wants, the company’s desires, consumers’ long-run interests and society’s long-run interests Copyright 2013, Pearson Education Inc., Publishing as Prentice-Hall 1-28 1-28 The Societal Marketing Concept • Calls for sustainable marketing—socially and environmentally responsible marketing that meets the present needs of consumers while also preserving the ability of future generations to meet their needs According to UPS, social responsibility “isn’t just good for the planet. It’s good for business.” Copyright 2013, Pearson Education Inc., Publishing as Prentice-Hall 1-29 Figure 1.4 - The Considerations Underlying the Societal Marketing Concept Copyright 2013, Pearson Education Inc., Publishing as Prentice-Hall 1-30 Preparing an Integrated Marketing Plan and Program • Marketing mix tools • • • • Product Price Place (Distribution) Promotion • The firm must blend each marketing mix tool into a comprehensive integrated marketing program Copyright 2013, Pearson Education Inc., Publishing as Prentice-Hall 1-31 Customer Relationship Management • The overall process of building and maintaining profitable customer relationships by delivering superior customer value and satisfaction Copyright 2013, Pearson Education Inc., Publishing as Prentice-Hall 1-32 Customer Perceived Value • The customer’s evaluation of the difference between all of the benefits and all of the costs of a marketing offer relative to those of competing offers Copyright 2013, Pearson Education Inc., Publishing as Prentice-Hall 1-33 Customer Satisfaction • The extent to which the product’s perceived performance matches a buyer’s expectations Copyright 2013, Pearson Education Inc., Publishing as Prentice-Hall 1-34 Customer Satisfaction • For companies interested in delighting customers, exceptional value and service become part of the overall company culture Copyright 2013, Pearson Education Inc., Publishing as Prentice-Hall 1-35 Marketing at Work • In-N-Out Burger delights customers by focusing on friendly service and what it does well: making really good hamburgers, really good fries, and really good shakes Copyright 2013, Pearson Education Inc., Publishing as Prentice-Hall 1-36 Customer Relationships • Firms may choose to build relationships at different levels • Loyalty and retention programs to build relationships include • Frequency marketing programs • Club marketing programs JetBlue Airways offers its TrueBlue members frequent-flyer points they can use on any seat on any JetBlue flight with no blackout dates Copyright 2013, Pearson Education Inc., Publishing as Prentice-Hall 1-37 The Changing Nature of Customer Relationships • Customer profitability analysis eliminates losing customers and selects profitable ones with whom relationships should be developed Copyright 2013, Pearson Education Inc., Publishing as Prentice-Hall 1-38 Changing Nature of Relationships • Firms interact with customers using new technologies such as social networking, e-mail, Web sites, blogs, cell phones, and video sharing Cold Stone Creamery uses a variety of social media to engage customers on a more personal, interactive level Copyright 2013, Pearson Education Inc., Publishing as Prentice-Hall 1-39 Customer-Managed Relationships • Marketing relationships in which customers, empowered by digital technologies, interact with companies and with each other to shape their relationships with brands Copyright 2013, Pearson Education Inc., Publishing as Prentice-Hall 1-40 Consumer-Generated Marketing • Brand exchanges created by consumers by which consumers play an increasing role in shaping their own brand experiences and those of other consumers Harnessing consumer-generated marketing: H. J. Heinz invited consumers to submit homemade ads for its ketchup brand on YouTube Copyright 2013, Pearson Education Inc., Publishing as Prentice-Hall 1-41 Partner Relationship Management • Working closely with others inside and outside the company to jointly bring more value to customers • Partners inside the firm: • Cross-functional teams • Partners outside the firm: • Supply chain and channel partners Copyright 2013, Pearson Education Inc., Publishing as Prentice-Hall 1-42 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 its product categories Copyright 2013, Pearson Education Inc., Publishing as Prentice-Hall 1-43 Capturing Value From Customers • Superior customer value leads to highly satisfied loyal customers who buy more Stew Leonard’s customer service policy emphasizes the importance of bringing customers back to the stores for repeat sales Copyright 2013, Pearson Education Inc., Publishing as Prentice-Hall 1-44 Customer Equity • The total combined customer lifetime values of all the company’s current and potential customers To increase customer lifetime value and customer equity, Cadillac needs to make the Caddy cool again by targeting a younger generation of customers Copyright 2013, Pearson Education Inc., Publishing as Prentice-Hall 1-45 1-45 Figure 1.5 - Customer Relationship Groups Copyright 2013, Pearson Education Inc., Publishing as Prentice-Hall 1-46 The Changing Marketing Landscape • Economic • • • • uncertainties Growth in digital technology Rapid globalization Sustainable marketing Growth of not-forprofit marketing In the current economic environment, companies must emphasize the value in their value propositions, as Target did when it shifted the balance more toward the “Pay Less” half of its “Expect More. Pay Less” positioning Copyright 2013, Pearson Education Inc., Publishing as Prentice-Hall 1-47 Marketing at Work • The recession from 2008 to 2009 undermined consumer confidence • The post-recession era has seen a shift in spending patterns, with consumers becoming more frugal Even as the economy strengthens, rather than reverting to their old freespending ways, Americans are now showing an enthusiasm for sensible consumption not seen in decades Copyright 2013, Pearson Education Inc., Publishing as Prentice-Hall 1-48 Figure 1.6 - An Expanded Model of the Marketing Process Copyright 2013, Pearson Education Inc., Publishing as Prentice-Hall 1-49 Rest Stop: Reviewing the Concepts • Define marketing and outline the steps in the marketing process • Explain the importance of understanding customers and the marketplace and identify the five core marketplace concepts • Identify the key elements of a customerdriven marketing strategy Copyright 2013, Pearson Education Inc., Publishing as Prentice-Hall 1-50 Rest Stop: Reviewing the Concepts • Discuss customer relationship management and identify strategies for creating value for customers and capturing value from customers in return • Describe the major trends and forces that are changing the marketing landscape in this age of relationships Copyright 2013, Pearson Education Inc., Publishing as Prentice-Hall 1-51 All rights reserved. No part of this publication may be reproduced, stored in a retrieval system, or transmitted, in any form or by any means, electronic, mechanical, photocopying, recording, or otherwise, without the prior written permission of the publisher. Printed in the United States of America. Copyright © 2013 Pearson Education, Inc. Publishing as Prentice Hall Copyright 2013, Pearson Education Inc., Publishing as Prentice-Hall 1-52