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Module 1
Understanding How Marketing
Serves Customers And The Firm
Kotler’s Chapters 1 and 2
Chapter One: Marketing in the
Twenty-First Century
• Learning Objectives
– 1. Describe why Marketing is important to
different types of contemporary organizations
and in different environments.
– 2. Describe the core concepts of marketing and
the basic tasks performed by marketing
organizations and managers.
– 3. Discuss the differences between the various
company orientations toward the marketplace.
Chapter 1/Objective 1: Why
Marketing is Important
• Marketing is about identifying and meeting
human needs profitably.
• Marketers need to determine what their
customers want now and in the future.
• Marketers need to do this given the rapid
changes in the environment, recognizing
that their marketing strategy needs to be
constantly reviewed and refined.
Chapter 1/Objective 2:
Tasks of Marketing
• Scope of Marketing - 10 Entities/Offerings
– Goods, Services, Experiences, Events, Persons,
Places, Properties, Organizations, Information,
and Ideas.
• Decisions Marketers Make - Marketers have
to address a variety of variables given their
market (consumer, business, global, nonprofit,
government) and the environment. What variables
they have to focus on may vary.
Chapter 1/Objective 2:
Tasks of Marketing
• Definition of Marketing
– Marketing is the process of planning and
executing the conception, pricing, promotion,
and distribution of ideas, goods, and services to
create exchange that satisfy individual and
organization goals.
– Marketing is more than advertising and selling.
– Focus on choosing target markets, getting
/keeping customers and delivering value.
Chapter 1/Objective 2:
Core Concepts of Marketing
• Target Markets and Segmentation - Module 5
– Need to find likely (profitable) customers that
will make up the target market. For each target
market, firms have to develop a market offering
and position this offering in the minds of their
potential customers based on some particular
benefit the target market value.
• With E-Marketing those values include savings,
convenience, selection, personalization, information.
More details of E-Marketing in Module 9.
Chapter 1/Objective 2:
Core Concepts of Marketing
• Needs (human requirements), Wants (specific
learned means to satisfy needs), Demands (want
for a specific product with an ability to pay for it).
• Value and Satisfaction
– Value is the ratio between what the customer
gets (benefits) and what they give (costs).
– Satisfaction is the feeling of pleasure/
displeasure customers feel when they compare
their product experiences with expectations.
Chapter 1/Objective 2:
Core Concepts of Marketing
• Exchange and Transactions
–
–
–
–
Two parties, each with something of value
Each capable of communication and delivery
Each party free to accept/reject offer
Each party believes it is appropriate or
desirable to deal with the other party.
– Transaction occurs when the two parties agree
to exchange values.
Chapter 1/Objective 2:
Core Concepts of Marketing
• Relationships and Networks
– It is important to build long term relationships
with customers and other key stakeholders.
Chapter 2 discusses value delivery networks.
• Competition - different levels competition
– Brand competitors (similar products that serve
similar customers’ needs) to generic/total
budget competitors (customers have limited
dollars but unlimited different wants).
Chapter 1/Objective 2:
Core Concepts of Marketing
• Marketing Channels - Mix of 3 kinds Details in Module 7
– Communication - deliver/receive messages
– Distribution - display/deliver product
– Selling - effect transactions with buyers
• Supply Chain - represents a value delivery
system from raw materials to components to
final products carried to final buyers
Chapter 1/Objective 2:
Core Concepts of Marketing
• Marketing Environment - Module 3
– Task Environment is internal/cooperative
– Broad Environment is external: demographic,
economic, natural, technological, politicallegal, and socio-cultural
• Marketing Strategy - Modules 2, 4-8
– Target market + marketing mix (product, place,
promotion, and price)
Chapter 1/Objective 3: Company
Orientations Of Marketplace
•
•
•
•
Production Concept- make what can easily and cheaply
Product Concept - focus on high tech/high quality
Selling Concept - aggressive promotion to push product
Marketing Concept - focus on serving needs of target
market at a profit, build long term relationships with
customers. The whole firm has the responsibility to serve
customers’ needs, not just the marketing department.
• Societal Marketing Concept -focus beyond serving
needs of target market but also on benefiting society.
Chapter 2: Building Customer
Satisfaction, Value, + Retention
• Learning Objectives
– 1. Describes what constitutes customer value and
satisfaction and how they can be measured by a firm.
– 2. Describe how leading companies organize to
produce and deliver high customer value and
satisfaction.
– 3. Discuss how firms can retain as well as attract
customers and why this is important.
– 4. Compute the cost of lost customers as well as
customers’ lifetime value.
Chapter 2/Objective 1: Customer
Value and Satisfaction
• Customer Delivered Value
– What one gets (value/benefits) > What one
gives (cost)
– Customers maximize what they get for their
costs (monetary, time, energy, and psychic)
• Customer Satisfaction - perceptions key
– Effectively manage product expectations
– Track product performance vs. competition See Table 2.1
Chp 2/Objective 2: Delivering
Customer Value + Satisfaction
• Value Chain
– Each activity a company engages in is a link in
a chain (that is why key that everyone in firm
focuses on customers). See Figure 2.3.
• Value-Delivery Networks (Supply Chain)
– Suppliers, manufacturers, distributors, retailers,
etc… must all work together to achieve its
goals and serve customers
Chp 2/Objective 3: Attracting
and Retaining Customers
• Dissatisfied customers will spread negative
word of mouth (WOM) to others.
• Satisfied customers stay loyal longer, buy
new products/upgrades, spread positive
WOM, are less price sensitive, are less
susceptible to competition, and cost less to
serve than new customers.
Chp 2/Objective 3: Attracting
and Retaining Customers
• Relationship Marketing Key
– Provide structural ties to customers (ex. customer sets
up long distance phone service so it is automatically
billed to credit card and they get frequent flyer points).
This is hard for customers to change and provides them
with the greatest benefit.
– There needs to be more than a financial benefit (ex.
discount, as this is the easiest for competitors to copy)
or a social benefit (ex. set up chat rooms for customers
to discuss).
Chp 2/Objective 3: Attracting
and Retaining Customers
• Progression Customer/Company Interdependence
– Basic Marketing - sell product
– Reactive Marketing - sell product plus encourage
customer to call if needed
– Accountable Marketing - salesperson calls customer to
see if product meeting expectations
– Proactive Marketing - salesperson maintains contact
with customer to let them know new things
– Partnership Marketing - firm works with customer to
find ways to perform better
Chapter 2/Objective 4: Cost of
Customers and Lifetime Value
• Computing Cost of Lost Customers
– Define and measure retention rate/defection rate.
– Determine attrition causes/what can do better.
– Determine how much profit losing from this.
• Customer Lifetime Value - present value of profit stream that
firm would have realized if profitable customer had not left.
– Determine if costs to reduce defection < lost profit. If
so, company needs to reduce defection rate.
Chapter 2/Objective 4: Cost of
Customers and Lifetime Value
• Need for Customer Retention
– Key to retention is customer satisfaction.
– Must exceed customer expectations.
• 95% dissatisfied customers don’t complain, they just stop
buying.
• Can keep up to 95% of dissatisfied customers if quickly and
effectively resolves problem. Won back customers tell
approximately 5 people of good treatment. Winning back lost
customers cheaper than attracting new customers.
• See statistics of customer retention in book.
Module 1 - Conclusion
• Firms need to find out who are their profitable
customers are and what do they need given the
ever-changing environment. They must integrate
what the firm is doing (along with their supply
chain) to meet this target market’s needs
effectively and develop a long term relationship
where the customer is satisfied.
• Any Questions?