WHAT IS MARKETING?

Simple Definition of Marketing

Marketing is managing profitable customer relationships. The twofold goal of

marketing is to attract new customers by promising superior value and to keep and
grow current customers by delivering satisfaction.

Marketing Defined

The process by which companies create value for customers and build strong
customer relationships to capture value from customers in return.

Broadly defined, marketing is a social & managerial process by which

individuals/organizations obtain what they need/want through creating & exchanging
value with others. In a narrower business context, marketing involves building
profitable, value-laden exchange relationships with customers.

The Marketing Process (5-Step Model)

The first four steps create value for customers. In the final step, the company reaps
the rewards of strong customer relationships by capturing value from customers.

1) UNDERSTANDING THE MARKETPLACE &

CUSTOMER NEEDS
We examine 5 core customer & marketplace concepts: (1) needs, wants, &
demands; (2) market offerings (products, services & experiences); (3) value &
satisfaction; (4) exchanges & relationships; and (5) markets.

Customer Needs, Wants, and Demands

Needs are states of felt deprivation. They include basic physical needs for food,

clothing, warmth, & safety; social needs for belonging & affection; and individual
needs for knowledge & self-expression.

Wants are the form human needs take as they are shaped by culture & individual
personality. When backed by buying power, wants become demands. Given their
wants & resources, people demand products with benefits that add up to the most
value & satisfaction.

Market Offerings (Products, Services & Experiences)

Consumers’ needs and wants are fulfilled through market offerings – some

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

What’s Marketing Myopia?

The mistake of paying more attention to specific products a company offers than to
the benefits & experiences produced by these products, and the needs underlying
the demand behind those products.

Smart marketers look beyond the attributes of the products and services they sell. By
orchestrating several services and products, they create brand experiences for
consumers.

Customer Value & Satisfaction

Marketers must be careful to set the right level of expectations. If they set
expectations too low, they may satisfy those who buy but fail to attract enough
buyers. If they set expectations too high, buyers will be disappointed. Customer
value and customer satisfaction are key building blocks for developing and managing
customer relationships.

Exchanges & Relationships

Exchange is the act of obtaining a desired object from someone by offering

something in return. In the broadest sense, the marketer tries to bring about a
response (either a purchase, a vote, membership, etc.) to some market offering.

Marketing consists of actions taken to create, maintain, and grow desirable

exchange relationships with target audiences involving a product, service, idea, or
other object.

Markets

A market is the set of actual & potential buyers of a product or service. These buyers
share a need or want that can be satisfied through exchange relationships.

Modern Marketing System

The company & competitors research the market. They create & send their market
offerings to consumers, directly or through marketing intermediaries. Each party is
affected by major environmental forces (demographic, economic, natural,
technological, political & social/cultural).

Each party in the system adds value for the next level. The arrows represent
relationships that must be developed and managed.

2) DESIGNING A CUSTOMER-DRIVEN MARKETING

STRATEGY
What is Marketing Management?

The art and science of choosing target markets and building profitable relationships
with them. The marketing manager’s aim is to find, attract, keep, and grow target
customers by creating, delivering, and communicating superior customer value.
Simply put, marketing management is customer management and demand
management.

2 Important Questions Marketing Managers Must Answer:

 What customers will we serve (target market)?

 How can we serve these customers best? What our value proposition?

Selecting Customers to Serve

Company first decides whom it’ll serve. It does this by dividing the market into
segments of customers (market segmentation) & selecting which segments it will
go after (target marketing).

Choosing a Value Proposition

Company needs to decide how it will differentiate & position itself in the

marketplace. A value proposition is the set of benefits or values it promises to
deliver to consumers to satisfy their needs. They answer the customer’s question,
“Why should I buy your brand rather than a competitor’s?”.
Marketing Management Orientations

There are 5 alternative concepts under which organizations design & carry out their
marketing strategies: the production, product, selling, marketing,
& societal marketing concepts.

The Production Concept

The idea that consumers will favour products that are available and highly affordable;
therefore, the organization should focus on improving production and distribution
efficiency.

Can cause marketing myopia!

The Product Concept

The idea that consumers will favour products that offer the most quality,
performance, and features; therefore, the organization should devote its energy to
making continual product improvements.

Can cause marketing myopia!

The Selling Concept

The idea that consumers will not buy enough of the firm’s products unless the firm
undertakes a large-scale selling and promotion effort. The selling concept is typically
practiced with unsought goods—those that buyers do not normally think of buying,
such as insurance.

Such aggressive selling, however, carries high risks. It focuses on creating

sales transactions rather than on building long-term, profitable customer
relationships.

The Marketing Concept

A philosophy in which achieving organizational goals depends on knowing the

needs/wants of target markets and delivering the desired satisfactions better than
competitors. Instead of a product-centred make-and-sell philosophy, this concept is a
customer-centred sense-and-respond philosophy.

The Societal Concept

The idea that a company’s marketing decisions should consider consumers’ wants,
the company’s requirements, consumers’ long-run interests, and society’s long-run
interests. Even more broadly, many leading business and marketing thinkers are
now preaching the concept of shared value, which recognizes that societal needs,
not just economic needs, define markets.
3) PREPARING AN INTEGRATED MARKETING PLAN
& PROGRAM
Next, the marketer develops an integrated marketing program that will deliver the
value to target customers. The marketing program builds customer relationships by
transforming the marketing strategy into action. It consists of the firm’s marketing
mix: the set of marketing tools the firm uses to implement its marketing strategy.

The major marketing mix tools are classified into four broad groups, called the four
P's of marketing: product, price, place & promotion.

4) BUILDING CUSTOMER RELATIONSHIPS

Customer Relationship Management

The overall process of building & maintaining profitable customer relationships by

delivering superior customer value & satisfaction. It deals with acquiring, keeping &
growing customers.

Relationship Building Blocks: Customer Value & Satisfaction

The key to building lasting customer relationships is to create superior customer

value & satisfaction.

Customer Value

A customer buys from the firm that offers the highest customer-perceived value –
the customer’s evaluation of the difference between all the benefits and all the costs
of a market offering relative to those of competing offers.

Customer Satisfaction

Customer satisfaction depends on the product’s perceived performance relative to

a buyer’s expectations. If the product’s performance falls short of expectations, the
customer is dissatisfied. If performance matches expectations, the customer is
satisfied. If performance exceeds expectations, the customer is highly satisfied or
delighted.
Higher levels of customer satisfaction lead to greater customer loyalty, which in turn
results in better company performance.

Customer Relationship Levels & Tools

A company with many low-margin customers may seek to develop basic

relationships with them through brand-building advertising, websites & social media
presence. At the other extreme, in markets with few customers & high margins,
sellers want to create full partnerships with key customers.

Marketers can use specific marketing tools to develop stronger bonds with
customers. For example, many companies offer frequency marketing
programs that reward customers who buy frequently or in large amounts.

Other companies sponsor club marketing programs that offer members special

benefits and create member communities. Like how Apple encourages customers to
form local Apple user groups.

Engaging Customers

Customer Engagement & Today’s Digital and Social Media

Yesterday’s companies focused on mass-marketing to broad segments at arm’s

length. By contrast, today’s companies are using online, mobile & social media to
refine targeting and to engage customers more deeply. The new marketing, known
as customer-engagement marketing, fosters direct customer involvement in
shaping brand conversations, brand experiences & brand community.

Today’s consumers are better informed, more connected, and more empowered
than ever before. Thus, marketers are now embracing not only customer relationship
management, but also customer-managed relationships, in which customers
connect with companies and with each other to help forge their own brand
experiences.

The key to engagement marketing is to find ways to enter consumers’ conversations

with engaging and relevant brand messages.

Consumer-Generated Marketing

A form of customer-engagement marketing is consumer-generated marketing,

where consumers themselves are playing a bigger role in shaping their own brand
experiences and those of others.

Consumers can discuss with each other, companies can ask consumers for new
product ideas, companies can engage consumers in competitions, etc.

Partner Relationship Management

In addition to being good at customer relationship management, marketers must be
good at partner relationship management – working closely with others inside and
outside the company to jointly bring more value to customers.

In today’s more connected world, every functional area in the organization can
interact with customers. The new thinking is that – no matter what your job is in a
company – you must understand marketing and be customer focused.

Supply Chains

Marketers must also partner with suppliers, channel partners & others outside the
company. Marketing channels consist of distributors, retailers, and others who
connect the company to its buyers. The supply chain describes a longer channel,
stretching from raw materials to components to final products that are carried to final
buyers. Through supply chain management, companies today are strengthening
their connections with partners all along the supply chain.

5) CAPTURING VALUE FROM CUSTOMERS

Creating Customer Loyalty & Retention

Good customer relationship management creates customer satisfaction. In turn,

satisfied customers remain loyal and talk favourably to others about the company
and its products. Loyal customers spend more and stay around longer. It’s 5x
cheaper to keep an old customer than acquire a new one. Conversely, customer
defections can be costly.

Customer Lifetime Value

The value of the entire stream of purchases a customer makes over a lifetime of
patronage.

Growing Share of Customer

Good customer relationship management can help marketers increase their share of

customer – the share they get of the customer’s purchasing in their product
categories. Ex: airlines want greater ‘share of travel’. To increase share of customer,
firms can offer greater variety to current customers. Or they can create programs to
cross-sell and up-sell in order to market more products and services to existing
customers.

Building Customer Equity

What is Customer Equity?

The ultimate aim of customer relationship management is to produce high customer

equity. Customer equity is the total combined customer lifetime values of all the
company’s current and potential customers. As such, it’s a measure of the future
value of the company’s customer base. Clearly, the more loyal the firm’s profitable
customers, the higher its customer equity.

Building the Right Relationships with the Right Customers

Companies should view customers as assets that need to be managed/maximized.

But not all customers are good investments. Which customers should the company
acquire & retain?

The company can classify customers according to their potential profitability and
manage its relationships with them accordingly.

 Strangers: The relationship management strategy for these customers is

simple: Don’t invest anything in them.
 Butterflies: Create profitable transactions with them, capturing as much of
their business as possible in the short time during which they buy from the
company. Then, it should cease investing in them until the next time around.
 True Friends: Make continual relationship investments to delight these
customers and nurture, retain, and grow them.
 Barnacles: Company might be able to improve their profitability by selling
them more, raising their fees, or reducing service to them. However, if they
cannot be made profitable, they should be “fired.”

THE CHANGING MARKETING LANDSCAPE (5

MAJOR DEVELOPMENTS)
The Digital Age: Online, Mobile & Social Media Marketing

Digital & social media marketing involves using digital marketing tools such as
websites, social media, mobile ads and apps, online video, email, blogs, and other
digital platforms that engage consumers anywhere, anytime via their computers,
smartphones, tablets, Internet-ready TVs, and other digital devices.

Social Media Marketing

Nearly 90% of all U.S. companies now use social media as part of their marketing
mixes. By various estimates, social media spending accounts for about 10% of
marketing budgets & will rise to an estimated nearly 20% within the next five years.

Mobile Marketing

Mobile marketing is perhaps the fastest growing digital marketing platform. A 2014
survey of Canadian smartphone owners found that 70% of them use their phones for
shopping-related activities—browsing product information through apps or the mobile
Web, making in-store price comparisons, reading online product reviews, finding &
redeeming coupons, etc.

The Changing Economic Environment

The Great Recession of 2008–2009 and its aftermath hit consumers hard. However,
even as the economy has strengthened, rather than reverting to their old free-
spending ways, Canadians are now showing an enthusiasm for frugality not seen in
decades. Because of this, companies are focusing on value-for-the-money,
practicality, and durability in their product offerings and marketing pitches.

The Growth of Not-For-Profit Marketing

Recently, marketing has also become a major part of the strategies of not-for-profit
organizations, such as universities, hospitals, museums, zoos, religious institutions,
government/military agencies, etc. Sound marketing can help them attract
membership, funds & support.

Rapid Globalization

Today, almost every company, large or small, is touched in some way by global
competition. Thus, managers in countries around the world are increasingly taking a
global, not just local, view of the company’s industry, competitors, and opportunities.

Sustainable Marketing: More Environmental & Social Responsibility

As the worldwide consumerism and environmentalism movements mature, today’s

marketers are being called on to develop sustainable marketing practices. Today’s
customers expect companies to deliver value in a socially and environmentally
responsible way.