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PRINCIPLES OF MARKETING
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Module 1: Marketing: Creating
and Capturing Customer Value
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Copyright Warning
This presentation is the intellectual property of Pearson Education
Inc. 2011. Students are hereby advised that they may not copy or
distribute this work to any third party
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Rest Stop: Previewing the Concepts
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.
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Describe
the major trends and forces that are changing the
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marketing landscape.
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First Stop
Zappos Creates Customer Value & Relationships
Customer Value
Building Relationships
Goal: Provide the very best
customer service & customer
experience.
Customer-centric: Free delivery,
free returns, 365 day return policy
& service upgrades.
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Results: 75% of sales come from
current customers, tremendous
sales growth
despite poor
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economy, 10 million customers.
Service Culture: Built around 10
core principles; every new hire
has 4 weeks of customer loyalty
training.
Commitment: Employees
are offered $2,000 to quit, only 1%
do so.
Lifelong relationships are
the goal: Social networking
provides direct contact to
customers; buyer feedback and
criticism is strongly encouraged
and valued.
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What Is Marketing?
Simple definition:
Marketing is managing profitable customer relationships.
Goals:
Attract new customers by promising superior value.
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.
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OLD view of
marketing:
NEW view of
marketing:
Making a sale—
“telling and selling”
Satisfying
customer needs
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Marketing Defined
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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.
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Old View:
“Telling and Selling”
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New View:
Satisfying Needs
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Figure 1.1:
A Simple Model
of the Marketing Process
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Core Concepts
Marketers must understand five core customer and marketplace
concepts:
Needs, wants, and demands.
Market offerings.
Value and satisfaction.
Exchanges and relationships.
Markets.
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Needs, Wants, and Demands
Need:
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:
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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.
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Marketing offers
fulfill needs and wants
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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.
They focus on the “wants” and lose sight of the “needs.”
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Fuel for Thought
The music industry provides an excellent example of marketing
myopia, as firms were initially very reluctant to adapt to consumers’
desires for digital music downloads.
Can you think of another company, product, service, or industry that
may be endangering its future due to a marketing myopia?
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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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Marketing in Action
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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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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:
What customers will we serve?
What is our target market?
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.
Target marketing:
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
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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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Figure 1.3:
The Selling and Marketing Concepts Contrasted
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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 1.4:
The Considerations Underlying the
Societal Marketing Concept
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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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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
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
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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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Marketing in Action
People love their petlike little Roombas.
They name them, talk
to them, and even buy
a second one so that
the first one won’t be
lonely.
iRobot has turned
buyers into an army of
Roomba consumer
evangelists.
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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
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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 Marketing
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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Marketing in Action
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66% of McDonald’s
revenue now comes
from outside the US.
200,000 new donors contributed
$30 million to the APSCA as a
result of “The Ad”
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Figure 1.6:
An Expanded Model of the Marketing Process
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Rest Stop: Reviewing the Concepts
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.
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Describe
the major trends and forces that are changing the
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marketing landscape.
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