Chapter 1.

Marketing: Creating and Capturing Customer Value

Today’s successful companies have one thing in common: They are strongly customer focused and heavily committed to
marketing. These companies share a passion for understanding and satisfying customer needs in well-defined target
markets. They motivate everyone in the organization to help build lasting customer relationships based on creating
value.

What is Marketing?

 Marketing, more than any other business function, deals with customers.
 The twofold goal of marketing is to attract new customers by promising superior value and keep and grow
current customers by delivering satisfaction.
 Sound marketing is critical to the success of every organization. Large for-profit firms, such as Procter & Gamble,
Google, Target, Toyota, and Marriott use marketing. But so do not-for-profit organizations, such as colleges,
hospitals, museums, symphony orchestras, and even churches.
 You already know a lot about marketing—it’s all around you. Marketing comes to you in the good old traditional
forms
 At home, at school, where you work, and where you play, you see marketing in almost everything you do.

Marketing Defined

 Marketing must be understood not in the old sense of making a sale—“telling and selling”—but in the new sense
of satisfying customer needs
 If the marketer understands consumer needs; develops products that provide superior customer value; and
prices, distributes, and promotes them effectively, these products will sell easily.
 Marketing as the process by which companies create value for customers and build strong customer
relationships in order to capture value from customers in return.

The Marketing Process

Understanding the Marketplace and Customer Needs

Five core customer and marketplace concepts:

1. Needs, wants, and demands

Needs - States of felt deprivation.

Wants - The form human needs take as they are shaped by culture and individual personality.
Demands - Human wants that are backed by buying power.

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

Marketing myopia - The mistake of paying more attention to the specific products a company offers than to
the benefits and experiences produced by these products.

3. Value and 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.
 Satisfied customers buy again and tell others about their good experiences. Dissatisfied customers often
switch to competitors and disparage the product to others.

4. Exchanges and relationships

 Exchange is the act of obtaining a desired object from someone by offering something in return.
 Marketing consists of actions taken to build and maintain desirable exchange relationships with target
audiences involving a product, service, idea, or other object. Beyond simply attracting new customers
and creating transactions, companies want to retain customers and grow their businesses.

5. Markets
 A market is the set of actual and potential buyers of a product or service. These buyers share a particular
need or want that can be satisfied through exchange relationships.
 The company and competitors research the market and interact with consumers to understand their
needs. Then they create and send their market offerings and messages to consumers, either directly or
through marketing intermediaries. Each party in the system is affected by major environmental forces
(demographic, economic, natural, technological, political, and social/cultural).
Designing a Customer-Driven Marketing Strategy

 Now that the company fully understands its consumers and the marketplace, it must decide which customers it
will serve and how it will bring them value, marketing management can design a customer-driven marketing
strategy.
 Marketing management as 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.

To design a winning marketing strategy, the marketing manager must answer two important questions:

1. What customers will we serve (what’s our target market)?

 The company must first decide whom it will serve. It does this by dividing the market into segments of
customers (market segmentation) and selecting which segments it will go after (target marketing). Some
people think of marketing management as finding as many customers as possible and increasing
demand. But marketing managers know that they cannot serve all customers in every way. By trying to
serve all customers, they may not serve any customers well. Instead, the company wants to select only
customers that it can serve well and profitably.

2. How can we serve these customers best (what’s our value proposition)?
 The company must also decide how it will serve targeted customers
 A brand’s value proposition is the set of benefits or values it promises to deliver to consumers to satisfy
their needs.
 Like for example, at SM Dept Store, they say "We got it all for you".

Five alternative concepts under which organizations design and carry out their marketing strategies:

1. Production concept
 The idea that consumers will favor products that are available and highly affordable and that the
organization should therefore focus on improving production and distribution efficiency.
2. Product concept
 The idea that consumers will favor products that offer the most quality, performance, and features and
that the organization should therefore devote its energy to making continuous product improvements.

3. Selling Concept
 The idea that consumers will not buy enough of the firm’s products unless it undertakes a large-scale
selling and promotion effort.

4. Marketing concept
 A philosophy that holds that achieving organizational goals depends on knowing the needs and wants of
target markets and delivering the desired satisfactions better than competitors do.

5. Societal Marketing Concept

 The societal marketing concept questions whether the pure marketing concept overlooks possible
conflicts between consumer short-run wants and consumer long-run welfare. Is a firm that satisfies the
immediate needs and wants of target markets always doing what’s best for its consumers in the long
run? The societal marketing concept holds that marketing strategy should deliver value to customers in
a way that maintains or improves both the consumer’s and society’s well-being.
Preparing an Integrated Marketing Plan and Program

 The company’s marketing strategy outlines which customers it will serve and how it will create value for these
customers. Next, the marketer develops an integrated marketing program that will actually deliver the intended
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 Ps of marketing: product, price,
place, and promotion

Managing Customer Relationships and Capturing Customer Value

 Doing a good job with the first three steps in the marketing process sets the stage for step four, building and
managing lasting customer relationships.

Customer 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.
Customer relationship management is perhaps the most important concept of modern marketing. Some
marketers define it narrowly as a customer data management activity (a practice called CRM). By this
definition, it involves managing detailed information about individual customers and carefully managing
customer “touchpoints” to maximize customer loyalty.

Relationship Building Blocks

The key to building lasting customer relationships is to create superior customer value and satisfaction.
Satisfied customers are more likely to be loyal customers and give the company a larger share of their
business.
Attracting and retaining customers can be a difficult task. Customers often face a bewildering array of
products and services from which to choose. A customer buys from the firm that offers the highest
customer-perceived value.

1. Customer Value and Satisfaction

A customer buys from the firm that offers based on the highest form of:

Customer-perceived value

 The customer’s evaluation of the difference between all the benefits and all the costs of a marketing offer
relative to those of competing offers.

Customer satisfaction

 The extent to which a product’s perceived performance matches a buyer’s expectations

2. Customer Relationship Levels and Tools

 Companies can build customer relationships at many levels, depending on the nature of the target market. At
one extreme, a company with a low-margin customers may seeks to develop basic relationships with them.
o They create engagement and relationships through product experiences, brand-building advertising,
websites and social media. (with many low-margin customers)
o Seller wants to create full-partnerships with key customers (few customer with high margin)
o Beyond offering consistently high value and satisfaction, marketers can use specific marketing tools to
develop stronger bonds with customers. For example, many companies offer frequency marketing
programs that reward customers who buys frequently or in large amounts.