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CHAPTER 1

Marketing: Creating and Capturing Customer Value

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Chapter Overview1. 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.

4. Discuss customer relationship management and creating value for and capturing value from customers.

5. Describe the major trends and forces changing the marketing landscape.

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Value Creation for Tide

History: Tide is an innovative brand, historically positioned on the basis of superior functional performance.

At Issue: Competitors can copy product benefits quickly, but can not copy feelings toward the brand.

Challenge: Understand what the brand name means to consumers and how it fits into their lives.

Goal: “Speak eye-to-eye with consumers.”

Case Study – Proctor and Case Study – Proctor and GambleGamble

Building Relationships

Research Process: Explored emotional connections women have with their laundry via consumer immersion.

Findings: Women are linked emotionally to clothing. Fabrics allow women to express their attitidues, personality, and multiple faces of being female.

“Tide Knows Fabrics Best”: Campaign featured in rich visual imagery and meaningful emotional connections.

Result: 7% sales increase.

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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 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.

OLD Viewof Marketing:

Making a Sale –“Telling & Selling”

New View of Marketing:

Satisfying customer needs

NEW View of Marketing:

Satisfying Customer Needs

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The Marketing Process A simple model of the marketing process:

Understand the marketplace and customer needs and wants.

Design a customer-driven marketing strategy. Construct a marketing program that delivers

superior value. Build profitable relationships and create

customer delight. Capture value from customers to create

profits and customer quality.

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Needs, Wants, & Demands

Need: State of felt deprivation including physical, social, and individual needs. Physical needs:

Food, clothing, shelter, safety Social needs:

Belonging, affection Individual needs:

Learning, knowledge, self-expression

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Needs, Wants, & Demands

Wants: Form that a human need takes, as shaped by culture and individual personality.

Wants + Buying Power = Demand

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Need / Want Fulfillment

Needs and wants are fulfilled through a Marketing Offer:

Some combination of products, services, information, or experiences offered to a market to satisfy a need or want.

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Need / Want Satisfiers

Products: Persons Places Organizations Information Ideas

Services Activity or benefit

offered for sale that is essentially intangible and does not result in ownership.

Brand Experiences: “. . . dazzle their senses, touch their hearts, stimulate their minds.”

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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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Value & Satisfaction

Care must be taken when setting expectations:

If performance is lower than expectations, satisfaction is low.

If performance is higher than expectations, satisfaction is high.

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Exchange vs. Transaction

Exchange: Act of obtaining

a desired object from someone by offering something in return.

Transaction: A trade of values

between two parties.

One party gives X to another party and gets Y in return. Can include cash, credit, or check.

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What Is a Market?

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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Modern Marketing Systems

Main elements in a modern marketing system include: Suppliers Company (marketer) Competitors Marketing intermediaries Final users

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Marketing Management

The art and science of choosing target markets and building profitable relationships with them. Requires that consumers and the

marketplace be fully understood What Customers Will We Serve? How will we Serve them Best? (Our

VALUE Proposition)

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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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Segmentation & Target Marketing

Market Segmentation: Divide the market into segments of

customers

Target Marketing: Select the segment to cultivate

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Marketing Management

Demand Management Finding and

increasing demand, also changing or reducing demand, as in demarketing.

Demarketing Temporarily or

permanently reducing the number of customers or shifting their demand.

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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 Management Philosophies

Production Concept Product Concept Selling Concept Marketing Concept Societal Marketing Concept

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The Marketing Plan

Transforms the marketing strategy into action

Includes the marketing mix and 4 P’s 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. Acquiring customers Keeping customers Growing customers

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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 Satisfaction

Dependent on the product’s perceived performance relative to a buyer’s expectations. Customer satisfaction often leads to

consumer loyalty. Some firms seek to DELIGHT

customers by exceeding expectations.

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Customer Relationships Loyalty and retention programs build

relationships and may feature: Financial Benefits

EX: Frequency marketing programs Social Benefits

EX: Club marketing programs Structural Ties

Focus is on relating directly to profitable customers, for the long term.

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Partner Relationship Marketing

Marketing partners help create customer value and assist in building customer relationships.

Partners inside the firm: All employees customer focused Teams coordinate efforts toward customers

Partners outside the firm: Supply chain management Strategic alliances

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Customer Loyalty & Retention

Customer Lifetime Value The entire

stream of purchases that the customer would make over a lifetime of patronage.

Share of Customer The share a

company gets of the customers purchasing in their product categories.

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Customer Equity

The combined discounted customer lifetime values of all the company’s current and potential customers. Classify customers by loyalty and

potential profitability Manage accordingly

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New Marketing Landscape

The New Digital Age Rapid Globalization Ethics and Social Responsibility Not-for-Profit Marketing New World of Marketing

Relationships

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The New Digital Age

Technology impacts the ways firms bring value to their customers.

Greater connectivity means greater access to information, faster travel and communication.

The Internet allows anytime, anywhere connections between firms and customers. “Click-and-mortar” companies “Click-only” companies Business-to-business e-commerce

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You Should Now be Able to: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.

4. Discuss customer relationship management and creating value for and capturing value from customers.

5. Describe the major trends and forces changing the marketing landscape.