Download Marketing is

Principles of
Marketing
“ Marketing : Managing Profitable
Customer Relationships”
What Marketing is NOT?
It is NOT just advertising and
selling – these are just two of the
marketing functions and often
NOT the most important ones. It
is NOT about ‘telling and selling’
in fact it is all about satisfying
customer needs.
•
Marketing is:

The delivery of customer satisfaction at a profit; its
goal is to attract new customers by promising
superior value and to keep current customers by
delivering satisfaction.

A social and managerial process by which
individuals and groups obtain what they need and
want through creating and exchanging products
and value with others.

A transaction inclusive of activities designed to
generate and facilitate exchanges intended to
satisfy human or organizational needs or wants.
The aim of Marketing
Quoting Peter Drucker
“ The aim of marketing is to make selling
superfluous. The aim is to know and
understand the customer so well that the
product or service fits…and sells itself”
The Marketing Process
Understand the
market place and
customer needs &
wants
Design a customer
driven marketing
strategy
Construct a
marketing program
that delivers
superior value
Deliver Value
to customers
Build profitable
relationships and
create customer
delight
Capture value from
customers to create
profits and
customer quality
Capture Value from
customers
Step 1:
To understand the marketplace and
Consumer needs the marketer has to
understand these Core Marketing
concepts:
1) Needs, Wants and Demands
2) Marketing Offers (products, services & experiences)
3) Value and Satisfaction
4) Exchanges and Relationships
5) Markets
Needs

States of felt deprivation: These may be
physical, social or individual in nature.
These are NOT created by marketers but
are a basic part of human makeup.
Wants

These are the form human needs take as
they are shaped by culture and individual
personality.
Demands

Wants backed by buying power.
Marketing Offers- Products,
Services & Experiences


A marketing offer is a combination of
products, services, information or
experiences offered to a market to satisfy
a need or a want.
They are not just limited to physical
products but they also include services,
activities or benefits offered for sale that
are essentially intangible and do not result
in ownership of anything.
Customer Value and Satisfaction:


These are the building blocks of any
marketing strategy. The scenario is quite
simple; satisfied customers buy again and tell
others about their good experiences and
dissatisfied customers switch to competitors
and badmouth about the company’s
products.
The marketer’s objective should be to set the
right level of expectation – you set them too
low , you don’t attract enough buyers, you set
them to high, buyers will be disappointed.
Exchanges & Relationships

Marketing occurs when people decide to
satisfy needs and wants through exchange
relationships.

EXCHANGE is the act of obtaining a desired
object from someone by offering something in
return
Markets

A market is the set of actual and potential
buyers of a product or a service. These
buyers share a particular need or want that
can be satisfied through exchange
relationships.
Company
( marketer)
suppliers
Marketing
Intermediaries
Competitors
End Users
Step 2:
Designing a Customer Driven market
strategy

Now that the marketer has understood the
marketplace, he/she must answer two important
questions;
1.
What customers will we serve? (the target
market)
2.
How can our selected customers be
served best? ( the value proposition)
3.
What philosophy will drive the marketing
strategy i.e. what weight age will be given
to the interests of the customers, the
organization , and society?
What Customers to serve?
Remember!
The company cannot serve all customers in every way
because by doing so they will not be able to serve any
customers well.
Henceforth the concept of Marketing Management steps in.
This is “ the art and science of choosing target markets
and building profitable relationships with them”
Key concepts are:
- Market segmentation
- Target Marketing
- De-marketing
Choosing a Value Proposition

Value Proposition (VP) is the answer to the
customer’s question “ Why should I buy your
product instead of the competitor’s?”

VP is how a company will differentiate and position it
self in the marketplace

VP is the set of benefits or value the company
promises to deliver to consumers to satisfy their
needs.
The driving philosophy!

The production concept – consumers will favor products that are available and
highly affordable, focus henceforth is on manufacturing and distribution
efficiency. (leading to marketing myopia)

The product concept – well manufactured products with continuous product
improvements (leading to marketing myopia)

The selling concept – the consumers will buy the products if and only if the
company takes in a large scale promotional effort (the hard selling may backfire)

The marketing concept – Design a product that the customer needs, don’t make
it and then try and sell it to him. (the effective, customer oriented way!)

Societal Marketing Concept – Ethical, socially conscious marketing where
consumer short run wants and their long run welfare is balanced.
A best working philosophy would be an overlap of the marketing and the Societal
Marketing concept because it is customer oriented in every possible fashion. It
is also essential as today's customer is aware and is gaining awareness at an
increasing rate, henceforth tacky marketing gimmicks and ploys are no longer
effective.
Step 3:
Preparing a Marketing Plan and Program
The marketing plan puts the marketing strategy into
action via the marketing mix – the 4 Ps
•
Product ( need satisfying marketing offer)
•
Price ( charge for the offer)
•
Place ( how offer will be made available)
•
Promotion ( how offer will be communicated to the
target audience and how they will be persuaded to
buy)
Step 4:
Building Profitable Customer Relationships



CRM – Customer Relationship
Management ; this is the overall process
of building and maintaining profitable
customer relationships by delivering
superior value and satisfaction.
This is used to retain current customers
and build profitable long term relationships
with them
The aim of CRM is not just to satisfy
customers but to delight them.
Customer Value – Customer Cost = Customer
Perceived Value
• Customers do not judge product costs and values
objectively, they act on perceived value. What ever
value a customer associates to a product is based
entirely on his perception about it.
• The customer’s perceived difference between the
benefits ( customer value) and the costs ( customer
cost) of a marketing offer is termed as Customer
Perceived Value.
Customer Satisfaction



The extent to which a product’s
perceived performance meets a buyers
expectation.
If performance falls short of expectation ,
there is dissatisfaction, if it meets
expectation , there is satisfaction and if
performance exceeds expectation the
customer is delighted.
Good marketers promise their customers
only what they can deliver and then over
deliver and delight their customers.
Kinds of customer relationships

Basic relationships (between companies and consumers)

Full partnerships (between a company and its distributors,
wholesales)

Frequency marketing programs (e.g. Frequent flyer programs or
discount on frequency purchases)

Club marketing programs ( e.g. Harley Davidson clubs)

Selective relationship management ( usually practiced by banks)

Direct Marketing (buying and selling on the internet )

Partnership relationship management (e.g. strategic alliances
and supply chain management)
Step 5:
Capturing value from Customers
Now that the company has delivered value TO the customer, the
next step is to capture value FROM the customer in terms of his
loyalty, market share, current and future sales and profits.



Customer lifetime value – the entire stream of
purchases a customer makes over a lifetime of
patronage.
Share of customer – the share the company
gets of the customer’s purchasing in their
product categories.
Customer Equity – The total combined CLVs of
all the company’s customers. Customer equity
suggests the future where as market and sales
share reflects the past.
Building the right relationship with the
right customers
Butterflies
High
profitability
Potential
profitability
Good fit b/w
offering and need
Strangers
Low
profitability
Bad fit b/w
offering and need
Short term customers
True Friends
Strong fit b/w
offering and need
Barnacles
Limited fit b/w
offering and need
Long term customers
Projected Loyalty




‘Strangers’ – Since they have least loyalty and
lowest profit potential , it is wise not to invest
anything in them.
‘Butterflies’ – They are one time purchasers or
erratic buyers, they exist because there is a
good fit between the company’s product and
their need . They are to be enjoyed like
butterflies i.e. until they fly away.
‘True Friends’ – They are profitable and loyal
and the company wants to turn them into ‘true
believers’
‘Barnacles’ – The highly loyal but not so
profitable type.
Henceforth build the right relationship with the
right customer.
Conclusion
-
Marketing is the process of building profitable
relationships with customers and then managing
these relationships to maximize on profits and
customer loyalty.
-
As a marketer you need to first understand the market,
then devise a customer driven marketing strategy,
then make a marketing program, build the profitable
relationships with customers and as a result derive
value from them
-
Finally in the face of today's changing markets,
companies must harness marketing technology, take
advantage of global opportunities and act in a social
and ethically responsible way.