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Marketing:
Creating and Capturing
Customer Value
Chapter
1
Chapter Outline
 What is Marketing?
 Understanding the Marketplace and





Customer Needs
Designing a Customer-Driven
Marketing Strategy
Preparing an Integrated Marketing Plan
and Program
Building Customer Relationships
Capturing Value from Customers
The Changing Marketing Landscape
Previewing the Concepts
1.
2.
3.
4.
5.
Define marketing and the marketing process.
Explain the importance of understanding
customers and identify the five core
marketplace concepts.
Identify the elements of a customer-driven
marketing strategy and discuss the marketing
management orientations that guide strategy.
Discuss customer relationship management
and identify strategies for creating value for
and capturing value from customers.
Describe the major trends and forces that are
changing the marketing landscape.
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What Is Marketing?
Simple definition:
Marketing is managing profitable
customer relationships.
Goals:
1. Attract new customers by
promising superior value.
2. Keep and grow current customers
by delivering satisfaction.
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Marketing Defined
 Marketing is the process by which companies
create value for customers and build strong
customer relationships in order to capture
value from customers in return.
OLD view of
marketing:
NEW view of
marketing:
Making a sale—
“telling and selling”
Satisfying
customer needs
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Figure 1.1:
A Simple Model of the
5-Step Marketing Process
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Core Concepts
 Marketers must understand
5 core customer & marketplace
concepts:
– Needs, wants, and demands.
– Market offerings.
– Value and satisfaction.
– Exchanges and relationships.
– Markets.
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Needs, Wants, and Demands
 Needs:
State of felt deprivation including
physical, social, and individual needs.
– Physical, social, and individual needs.
 Wants:
Form that a human need takes, as
shaped by culture and individual
personality.
 Wants + Buying Power = Demand.
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Needs, Wants, and Demands
 Types of Needs:
– Physical needs:
• Food, clothing,
shelter, safety.
– Social needs:
• Belonging, affection.
– Individual needs:
• Learning, knowledge,
self-expression.
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Is ice cream a “need”?
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Market Offerings
Some combination of products,
services, information, or
experiences offered to a market
to satisfy a need or want.
Customer needs and wants are
fulfilled through market offerings
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Marketing in Action
Market offerings
are not limited to
physical products.
UNCF powerfully
markets the idea
that “A mind is a
terrible thing to
waste.”
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Marketing Myopia
 Marketing myopia:
– Occurs when sellers pay more
attention to the specific products
they offer than to the benefits and
experiences produced by the
products.
– Focusing only on the existing
“wants” and losing sight of the
underlying consumer “needs.”
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Avoiding Marketing Myopia
 Marketing Myopia is management’s
failure to recognize the scope of its
business.
– To avoid marketing myopia, companies
must broadly define organizational
goals toward consumer needs
– Focus on benefits
Customer Value and Satisfaction
 Care must be taken when setting
expectations for market offerings:
– If performance is lower than
expectations, satisfaction is low.
– If performance is higher than
expectations, satisfaction is high.
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Customer Value and Satisfaction
Expectations
Customers
• Value and
satisfaction
Marketers
• Set the right level of
expectations
• Not too high or low
Marketing in Action
Advertising sets expectations, and
marketers must be careful not to
promise too much.
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Exchanges and Relationships
 Exchange:
– Act of obtaining
a desired object
from someone by
offering
something in
return.
 What would be
exchanged for a
vacation?
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Exchanges and Relationships
 Relationships:
– Marketing actions build and maintain
relationships with target audiences
involving an idea, product, service, or
other object.
– Marketers build strong relationships by
consistently delivering superior customer
value.
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What Is a Market?
 A market:
– Is the set of actual and potential
buyers of a product.
•These people share a need or want
that can be satisfied through
exchange relationships.
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 Marketing system consists of all
of the actors (suppliers, company,
competitors, intermediaries, and
end users) in the system who are
affected by major environmental
forces.
– Demographic
– Technological
– Economic
– Political-legal
– Physical
– Socio-cultural
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Figure 1.2:
A Modern Marketing System
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Marketing Management
 The art and science of choosing
target markets and building
profitable relationships with
them.
– Aim is to find, attract, keep, and
grow customers by creating,
delivering, and communicating
superior value.
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Marketing Management
 Designing a winning marketing
strategy requires answers to the
following questions:
1. What customers will we serve?
— What is our target market?
2. How can we best serve these
customers?
— What is our value proposition?
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Selecting Customers to Serve
 Market
Segmentation:
– Dividing the market
into segments of
customers.
 Market Targeting:
– Selecting one or
more segments to
cultivate.
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Choosing a Value Proposition
 The set of benefits or values a
company promises to deliver to
consumers to satisfy their needs.
– Value propositions dictate how
firms will differentiate and position
their brands in the marketplace.
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Marketing in Action
Many firms are emphasizing the “value” in their
value proposition during tough economic times.
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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.
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Marketing Management
Orientations
 The production concept is the idea that
consumers will favor products that are
available or highly affordable.
 The product concept is the idea that
consumers will favor products that offer
the most quality, performance, and
features for which the organization
should therefore devote its energy to
making continuous improvements.
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Marketing Management
Orientations
 The 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.
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The Marketing Concept
 The marketing concept:
– A marketing management
philosophy that holds that achieving
organizational goals depends on
knowing the needs and wants of
target markets and delivering the
desired satisfaction better than
competitors.
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Figure 1.3:
The Selling and Marketing
Concepts Contrasted
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The Societal
Marketing Concept
 The societal marketing concept:
– The idea that a company’s
marketing decisions should consider
consumer’s wants, the company’s
desires, consumers’ long-run
interests and society’s long-run
interests.
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Figure 1.4:
The Considerations Underlying the
Societal Marketing Concept
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Marketing in Action
Johnson &
Johnson’s credo
stresses putting
people before
profits—the
societal marketing
concept in action.
Visit The Body
Shop’s Web site
for another
example of a firm
which practices
the societal
marketing
concept.
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The Integrated Marketing Plan
 Transforms the marketing strategy
into action.
 Includes the marketing mix and 4
Ps of marketing:
– Product.
– Price.
– Place (Distribution).
– Promotion.
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Customer Relationship
Management
The overall process of building and
maintaining profitable customer
relationships by delivering superior
customer value and satisfaction.
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Building Customer Relationships
 Customer relationship management
(CRM):
– Deals with all aspects of acquiring,
keeping, and growing customers.
– Customer value and satisfaction are
key.
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Customer Perceived Value
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.
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Customer Perceived Value
 Customer
perceived value:
– Perceptions may
be subjective.
– To some
customers
“value” might
mean paying
more to get
more.
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Customer Satisfaction
Extent to which the
product’s perceived
performance matches
a buyer’s expectations.
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Customer Satisfaction
 Customer satisfaction:
– High levels of customer
satisfaction often leads
to consumer loyalty.
– Some firms seek to
DELIGHT customers by
exceeding expectations.
– Profitability must be
considered.
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Customer Relationships
 Firms may choose to build
relationships at different levels.
 Loyalty and retention programs
build relationships and may
include:
– Frequency marketing programs.
– Club marketing programs.
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Changing Nature of Relationships
 Customer
profitability
analysis
eliminates losing
customers and
selects profitable
ones with whom
relationships
should be
developed.
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American Express attempted
to weed out unprofitable
customers by offering them
$300 in exchange for paying
off their balances and closing
their accounts.
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Changing Nature of Relationships
 Firms now relate more deeply and
interactively via blogs, social network
Web sites, email, and video sharing.
 Embracing customer-managed
relationships requires marketing via
attraction rather than intrusion.
 Consumer-generated marketing has
become a significant marketing force.
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Marketing in Action
H.J. Heinz attempted to harness consumergenerated marketing and received 8,000
entries in a homemade ad contest for its
ketchup brand on YouTube.
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Partner Relationship Management
 Marketing partners help create
customer value and assist in
building customer relationships.
 Partners inside the firm:
– Cross-functional customer teams.
 Partners outside the firm:
– Supply chain management.
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Capturing Value From Customers
 Value is captured from customers via
current and future sales, market share
and profit.
– Superior customer value leads to highly
satisfied loyal customers who buy more.
– Key outcomes of customer value include
customer loyalty and retention, share of
market, share of customer, and
customer equity.
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Capturing Value From Customers
 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
their product categories.
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Customer Equity
 The total combined customer
lifetime values of all the
company’s current and potential
customers.
 Manage equity by:
– Classifying customers by projected
loyalty and potential profitability.
– Manage each group accordingly.
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Figure 1.5:
Customer Relationship Groups
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Changing Marketing Landscape
 The uncertain
economic
environment.
 The digital age.
 Rapid globalization.
 Sustainable marketing – call for
more social responsibility.
 Growth of not-for-profit marketing.
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So, What Is Marketing?
Pulling It All Together
Reviewing the Concepts
1. Define marketing and the marketing process.
2. Explain the importance of understanding
customers and identify the five core
marketplace concepts.
3. Identify the elements of a customer-driven
marketing strategy and discuss the marketing
management orientations that guide strategy.
4. Discuss customer relationship management
and identify strategies for creating value for
and capturing value from customers.
5. Describe the major trends and forces that are
changing the marketing landscape.
Copyright 2011, Pearson Education Inc., Publishing as Prentice-Hall
1-53