CHAPTER 1CHAPTER 1Marketing: Creating and Capturing Customer Value

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Chapter OverviewChapter 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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Case Study – Proctor and Case Study – Proctor and GambleGamble

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.”

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. 3

What Is Marketing?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 DefinedMarketing DefinedA social and managerial process

by which individuals and groups obtain what they need and want through creating and exchanging products and value with others.

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OLD Viewof Marketing:

Making a Sale –“Telling & Selling”

New View of Marketing:

Satisfying customer needs

NEW View of Marketing:

Satisfying Customer Needs

The Marketing ProcessThe Marketing Process

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The Marketing ProcessThe Marketing ProcessA 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.7

Needs, Wants, & Needs, Wants, & DemandsDemands

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

Wants + Buying Power = Demand

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Needs, Wants, & Demands

Need / Want FulfillmentNeed / Want FulfillmentNeeds 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 SatisfiersNeed / Want Satisfiers

Products:◦ Persons◦ Places◦ Organizations◦ Information◦ Ideas

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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.”

Marketing MyopiaMarketing MyopiaMarketing 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 “existing wants” and lose sight of the “underlying needs.”

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Value & SatisfactionValue & 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. TransactionExchange vs. Transaction

Exchange:◦Act of obtaining

a desired object from someone by offering something in return.

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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.

What Is a Market?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 Modern Marketing SystemsSystemsMain elements in a modern

marketing system include:◦Suppliers◦Company (marketer)◦Competitors◦Marketing intermediaries◦Final users

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Marketing ManagementMarketing 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 ManagementMarketing Management

Designing a winning marketing strategy requires answers to the following questions:

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1. What customers will we serve?What is our target market?

2. How can we best serve these customers?What is our value proposition?

Segmentation & Target Segmentation & Target MarketingMarketingMarket Segmentation:

◦Divide the market into segments of customers

Target Marketing:◦Select the segment to cultivate

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Marketing ManagementMarketing Management

Demand Management◦Finding and

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

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Demarketing◦Temporarily or

permanently reducing the number of customers or shifting their demand.

Value PropositionValue PropositionThe 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 Marketing Management PhilosophiesPhilosophies

Production ConceptProduct ConceptSelling ConceptMarketing ConceptSocietal Marketing Concept

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The Marketing PlanThe Marketing PlanTransforms the marketing

strategy into actionIncludes the marketing mix and 4

P’s of marketing:◦Product◦Price◦Place (Distribution)◦Promotion

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Customer Relationship Customer Relationship ManagementManagement

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 ValueCustomer 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 SatisfactionCustomer SatisfactionDependent 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 RelationshipsCustomer RelationshipsLoyalty 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 Partner Relationship MarketingMarketingMarketing 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 & Customer Loyalty & RetentionRetention

Customer Lifetime Value◦The entire

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

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Share of Customer◦The share a

company gets of the customers purchasing in their product categories.

Customer EquityCustomer EquityThe 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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Customer Relationship Customer Relationship GroupsGroups

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New Marketing LandscapeNew Marketing Landscape

The New Digital AgeRapid GlobalizationEthics and Social ResponsibilityNot-for-Profit MarketingNew World of Marketing

Relationships

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The New Digital AgeThe 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 You Should Now be Able to: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.

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