Topic1: Basic Concepts of Marketing

Simply put, marketing is managing profitable relationships, by attracting new customers by

superior value and keeping current customers by delivering satisfaction. Marketing must be
understood in the sense of satisfying customer needs. Marketing can be defined as the process
by which companies create value for customers and build strong customer relationships to
capture value from customers in return. A five-step model of the marketing process will provide
the structure of this chapter.

Understanding the marketplace and customer needs

There are five different core customer and marketplace concepts.

1. Customer needs, wants and demands. Human needs are states of felt deprivation and
can include physical, social and individual needs. Wants are the form human needs take
as they are shaped by culture and individual personality. Demands are human wants that
are backed by buying power.
2. Market offerings are a combinations of products, services and experiences offered to a
market to satisfy a need or want. These can be physical products, but also services –
activities that are essentially intangible. The phenomenon of marketing myopia is paying
more attention to company products, than to the underlying needs of consumers.
3. Value and satisfaction are key building blocks for customer relationships.
4. Exchanges are the acts of obtaining a desired object form someone by offering
something in return. Marketing consists of actions trying to build an exchange
relationship with an audience.
5. A market is the set of all actual and potential buyers of a product or service. Marketing
involves serving a market of final consumers in the face of competitors.

Designing a customer-driven marketing strategy

Marketing management is the art and science of choosing target markets and building
profitable relationships with them. The aim is to find, attract, keep and grow the targeted
customers by creating and delivering superior customer value. The target audience can be
selected by dividing the market into customer segments (market segmentation) and selecting
which segments to go after (target marketing). A company must also decide how to serve the
targeted audience, by offering a value proposition. A value proposition is the set of benefits or
values a company promises to deliver.

There are five alternative concepts that companies use to carry out their marketing strategy.

1. The production concept: the idea that consumers will favour products that are available
and highly affordable and that the organisation should therefore focus on improving
production and distribution efficiency.
2. The product concept: the idea that consumers will favour products that offer the most
quality, performance, and features and that the organisation should therefore devote its
energy to making continuous product improvements.
3. The selling concept: the idea that consumers will not buy enough of the firm’s product,
unless it undertakes a large-scale selling and promotion effort.
4. The marketing concept: the idea that achieving organisational goals depends on
knowing the needs and wants of target markets and delivering the desired satisfactions
better than competitors do. It can be regarded as an “outside-in view”.
5. The societal marketing concept is the idea that a company’s marketing decisions should
consider consumer wants, the company’s requirements, consumers’ long-term interests
and society’s long-term interests. Companies should deliver value in a way that maintains
consumers and society’s well-being.

Constructing an integrated marketing plan consecutive

A marketing strategy outlines which customers it will serve and how it will create value. The
marketer develops an integrated marketing plan that will deliver value to customers. It contains
the marketing mix: the tools used to implement the strategy, which are the four Ps: product,
price, place and promotion.

Building customer relationships

The first three steps all lead to this one: building profitable customer relationships. Customer
relationship management (CRM) is the overall process of building and maintaining profitable
customer relationships by delivering superior customer value and satisfaction. The crucial part
here is to create superior customer-perceived-value, which is the customer’s evaluation of the
difference between all the benefits and all the costs of a marketing offer, in relation to those of
competing offers and superior customer satisfaction, which is the extent to which a product’s
perceived performance matches a buyer’s expectations. Customer delight can be achieved by
delivering more than promised.

Customer relationships exist at multiple levels. They can be basic relationships or full
partnerships and everything in between. In current times, companies are choosing their
customers more selectively. New technologies have paved the way for two-way customer
relationships, where consumers have more power and control. The marketing world is also
embracing customer-managed relationships: marketing relationships in which customers,
empowered by today’s new digital technologies, interact with companies and with each other to
shape their relationships with brands. A growing part of this dialogue is consumer-generated
marketing: brand exchanges created by consumers themselves, by which consumers are playing
an increasing role in shaping their own brand experiences and those of other consumers.

Today’s marketers often work with a variety of partners to build consumer relationships.
Partner relationship management means working closely with partners in other company
departments and outside the company to jointly bring greater value to customers. These partners
can be inside the company, but also outside the firm. The supply chain is a channel, from raw
material to final product, and the companies involved can be partners through supply chain
management.
Capturing customer value

The final step of the model involves capturing value. Customer lifetime value is the value of the
entire stream of purchases that the customer would make over a lifetime of patronage.
Companies must aim high in building customer relations, to make sure that customers are
coming back. Good CRM can help increase the share of customer, the portion of the customer’s
purchasing that a company gets in its product categories. Customer equity is the total combined
customer lifetime values of all of the company’s customers. It is the future value of the
company’s customer base.

When building relationships, it is important to build the right relationships with the right
customers. Customers can be high- or low-profitable and short-term or long-term oriented. When
putting these on two axes, a matrix of four terms appears.

1. Butterflies are profitable, but not loyal and have a high profit potential.
2. True friends are both profitable and loyal and the firm should invest in a continuous
relationship.
3. Barnacles are loyal, but unprofitable. If they can’t be improved, the company should try
to get rid of them.
4. Strangers are not loyal and unprofitable, the company should not invest in them.

Today’s world is moving and changing fast. The economic crisis resulted in an uncertain
economic environment, where consumers are more careful when spending their money. The
technology boom of the digital age leads to an increase in connectedness and information. It
provides marketers with new ways to track customers and create products based on their needs. It
brought a new way of communicating and advertising. The most dramatic change in technology
is the Internet, a vast public web of computer networks that connects users of all types all
around the world to each other and an amazingly large information repository.

Web 1.0 connects people with information, Web 2.0 connected people with people and the
upcoming Web 3.0 puts information and people connections together into a more usable Internet
experience. Because of globalisation, companies are now globally connected with their
customers. Current times also involve more sustainable marketing practices, involving corporate
ethics and social responsibility.