Download Principles of Marketing

Chapter 1
Objectives
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

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
Defined marketing, and marketing process.
Examine five core customer and marketplace
concepts.
Identify the elements of a customer-driven
marketing strategy and discuss the marketing
management orientations.
Discuss customer relationship management and
creating value for and capturing value from
customers
Describe the major trends and forces changing the
marketing landscape
What is Marketing
The simplest definition of marketing is :
“ managing profitable customer relationship”


1.
2.
The two main goals of marketing is:
Attract new customer by promising superior value
To keep and grow current customer by delivering
satisfaction.
The key is delivering your promise
Wal-Mart “Always low price Always”
AT&T “it’s within your reach”
Dell “be direct”
Marketing Defined
 Kotler’s definition:
“Marketing is a social and managerial process by which
individuals and groups obtain what they need and want
through creating and exchanging value with others”

Marketing definition in the scope of business:
The process by which companies create value for
customers and build a strong customer relationship in
order to capture value from customer in return.

Marketers should understand consumer needs,
develops products that provide superior value, and
price, distributes, and promotes them effectively.
The Marketing Process
Understan
ding the
market
place and
customer
needs
and wants
Design a
customerdriven
marketing
strategy
Construct
marketing
program
that
deliver
superior
value
Build
profitable
relationshi
p and
create
customer
delight
Capture
value
from the
customers
to create
profits
Understanding The Market Place

Marketing Core Concepts:
Customer
needs,
wants, and
demands
Markets
Exchange
and
relationship
Market
offeringsproducts,
services,
and
experience
s
Customer
value and
satisfaction
Maslow’s Hierarchy of Needs
Self- actualization
Personal growth and
fulfillment
Esteem needs
Self-esteem, confidence,
achievement, respect of
others, respect by others
Belonging, and love needs
Family, friends, affection, relationships
Safety needs
Protection, security, order, law, limits, stability, etc
Physiological needs
Breathing, food, water, sleep
Needs, Wants, and Demand

Needs
 The state of deprivation
○ Example: Food

Wants
 The form human needs take as shaped by culture
and individual personality
○ Example: Want a big Mac

Demands
 Human wants that are backed by buying power

To understand customer needs wants and
demands marketers conduct consumer
research and analyze customer data
Market offers
Some combination of products, services,
information, or experiences offered to a
market to satisfy.
 Marketing offers are not limited to physical
products, it includes services, activities, or
benefits offered for sale that are intangible
and do not result in the owner ship of
anything“ Example: banking, airline,
hotel…”.
 Market offers It also includes other entities,
such as persons, place, organization,
information, and ideas.

Market Offers
Marketing myopia
“the mistake of paying more attention to the
specific product a company offers then to the
benefits and experiences produced by these
products”

Marketers shouldn’t focus only on existing
wants and lose sight of underlying customer
needs ………………... they should create
brand meaning and brand experiences
(Example: Coca-Cola, Nike)
 The product is only a tool to solve a consumer
problem.

Customer Value and Satisfaction
Customer form expectations about the value of
various marketing offers and buy accordingly.
 How do buyers form there expectations?

 Past buying experience.
 The opinions of friends.
 market and competitor information and promises

Customer satisfaction depend on how well the
product’s performance lives up to the customer’s
expectations.
Marketers must be careful to set the right level of
expectation.
Exchanges and Relationship
The act of obtaining a desired object
from someone by offering something in
return
 One exchange is not the goal,
relationships with several exchanges are
the goal
 Relationships are built through
delivering value and satisfaction

Markets
The Market is:
“ The set of actual and potential buyers of
a product.”
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Marketers should work to:
 understand the needs and wants of
specific markets.
 Select the market they can serve best.
 Developing products and services to
satisfy customers in this market.
Designing a Customer-Driven
Marketing Strategy
 Marketing
management
“is the art and science of choosing target
markets and building profitable
relationships with them.”
This definition must include answer to two
questions
1.
2.
What customers will we serve? (segmentation
and targeting)
How can we serve these customers best? (value
proposition)
Select Customer to Serve

Marketers decide who they will serve by dividing
the market into segments of customers. And select
which segment they will go after (target
marketing).
 Market segmentation: “ dividing a market into different
groups with similar needs, characteristics, or behaviors”
 Target marketing: the process of evaluating each
market segment’s attractiveness and selecting one or
more segment to enter.

Demand management
Marketers must deal with different demand states
ranging from no demand to too much demand.
Choosing the Value Proposition

The company must decide how it will serve
targeted customer-how it will differentiate and
position it self.
 Differentiation: the way that you make your business
or product more desirable than all the others like it.
(Example: Mercedes “Unlike any other” – BMW
“Ultimate Driving Machine”)
 Positioning: Is the process by which marketers try to
create an identity in the minds of their target market
for its product, brand, or organization. It is the image
their product occupies in a given market as perceived
by the target market. (Example: Honda – BMW)
Value Proposition:
“Is the set of benefits or values a company
promises to deliver to consumers to satisfy their
needs
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Marketing Management
Orientations
 The production concept:
The philosophy that consumers will favor products that are
available and highly affordable and that management
therefore should focus on improving production and
distribution efficiency. (Example: Ford, model T 19081927)
 The product concept:
The idea that consumers will favor products that offer the
most quality, performance, and features and that the
organization should therefore devote energy to making
continuous product improvements. (Example: the
mousetrap)
Marketing Management
Orientations
 The selling concept
The idea that consumers will not buy enough of the
organization’s products unless the organization
undertakes a large scale selling and promotion effort.
(Example: unsought products - blood donation)
 The marketing concept
The marketing management philosophy that holds that
achieving organizational goals depends on determining
the needs and wants of target markets and delivering the
desired satisfactions more effectively than competitors do.
(Example: Dell, Wal-Mart)
Marketing Management
Orientations
 The societal marketing concept
The idea that the organization should determine the
needs, wants and interests of target markets and
deliver the desired satisfactions more effectively and
efficiently than do competitors in a way that
maintains or improves the consumer’s and society’s
well being.(Example: fast-food industry)
Society
(human welfare)
Consumer
(want satisfaction)
Societal
marketing
concept
company
(profit)
Preparing a Marketing Plane and
Program


The marketing plane actually deliver the value
to the target customer, by transforming the
marketing strategy into actions.
The marketing plane consists of the firm’s
marketing mix, which called the four Ps
 Product: to deliver on it’s value proposition the firm
must first create a need-satisfying market offering.
 Price: it must decide how much it will charge for the
offer.
 Place: and how it will make the offer available to
target customer.
 Promotion: it must communicate with target
customer about the offer and persuade them of its
merits.
Building Customer Relationships

Customer
CRM
relationship
management
“The overall process of building and
maintaining
profitable
customer
relationships
by
delivering
superior
customer value and satisfaction. It deals
with all aspects of acquiring, keeping and
growing customers.”
CRM

Why the emphasis on retaining and growing
customers?
 There is fewer customers to go around due to
sophisticated competitors, and overcapacity in most
industries
 costs 5 to 10 times MORE to attract a new customer
than it does to keep a current customer satisfied.
 The lifetime value of the customer. Is the value of the
entire stream of purchases that the customer would
make over a life-time of patronage.
(Example: Stew Leonard)
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The key in building lasting customer relationship
is to create superior value, and satisfaction.
CRM
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Customer value
 Customer perceived value:
○ The difference between total customer value and
total customer cost.
TCV – TCC = CPV
○ The customer evaluation of the difference between
all the benefits and all the cost of a marketing offer
relative to those of competing offers.
Customers often do not judge values and
costs accurately or objectively.
 Customer often act on perceived value

(Example: FedEx)
CRM
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Customer satisfaction:
 Depend on the product’s perceived
performance relative to buyer’s expectations
 Performance matches expectations the
customer is satisfied, performance exceeds
expectations the customer is delighted.
 Satisfied customer repeat purchases, and
tell others.
Capturing Value From Customer
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Customer loyalty and retention:
 Loyalty increases as satisfaction levels increase
 Customer delight leads to emotional relationships and
loyalty
 loyal customers are less price sensitive.
 Customer Lifetime Value shows true worth of a customer
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Growing share of customer
 Share of customer’s purchase in a product category.
 Cross-selling (Example: Vodafone – TE-Data, the wireless
modem)
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Building customer equity
 The total combined customer lifetime values of all current
and potential customers.
 Measures a firm’s performance, but in a manner that looks
to the future.
 Customer lifetime value and customer equity are the name
of the game. (Example: Cadillac and BMW)
Customer relationships levels
and tools
 Target market nature decide the type the
relationship
 Basic relationship / low-margin customers
 Full partnership / high margin customers
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Customer loyalty and retention tools
 Adding financial benefits – frequency marketing
programs (Example: Marie Louis)
 Adding social benefits – club marketing programs
(Example: Swatch)
 Adding structural ties – special equipments
(Example: FedEx)
Marketing Challenges in the 21st
Century
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The new digital age
 Growth of the Internet
 Advances in telecommunications, information,
transportation
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Customer research and tracking
Product development
Distribution
New advertising tools
24/7 marketing through the Internet
Rapid globalization
 Geographical and cultural distances have shrunk
○ Greater market coverage
○ More options for purchasing and manufacturing
○ Increased competition from foreign competitors
Marketing Challenges in the 21st
Century

The call for more ethics and social
responsibility
 Marketers need to take great responsibility for
the impact of their actions
○ Caring capitalism is a way to differentiate your company

The growth of not-for-profit marketing
 Many organizations are realizing the importance
of strategic marketing
○ Performing arts
○ Government agencies
○ Colleges
○ Hospitals
Marketing Process
Understan
ding the
market
place and
customer
needs and
wants
Research
customer and
the market
place
Managing
marketing
information
and customer
data
Design a
customerdriven
marketing
strategy
Select
customer to
serve: market
segmentation
and targeting
Decide on
value
proposition:
differentiation
and positioning
Construct
marketing
program
that
deliver
superior
value
Build
profitable
relationshi
p and
create
customer
delight
Product and
service design:
building a
strong brand
Customer
relationship
management:
build strong
relationship
with chosen
customers
Create satisfied
loyal customer
Partner
relationship
management :
build a strong
relationship
with marketing
partners
Increase share
of market and
share of
customer
Price Create
real value
Distribution
manage
demand and
supply chain
Promotion
Communicating
the value
Capture
value from
the
customers
to create
profits
Capture
customer life
time value
What Is Marketing?
Pulling It All Together
The process of building profitable
customer relationships by creating value
for customers and capturing value in
return