Marketing Course Code: BBA-201
Chapter 1
Marketing; Creating and Capturing Customer Value
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.
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By: Muhammad Bilal Ahsan Roll no: 2015
Marketing Course Code: BBA-201
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 favor products that are available and
highly affordable and that the organization should therefore focus on improving production
and distribution efficiency.
2. The 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. 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 organizational 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
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
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.
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By: Muhammad Bilal Ahsan Roll no: 2015
Marketing Course Code: BBA-201
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.
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By: Muhammad Bilal Ahsan Roll no: 2015
Marketing Course Code: BBA-201
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 globalization, companies are now globally connected with their customers.
Current times also involve more sustainable marketing practices, involving corporate ethics and
social responsibility.
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By: Muhammad Bilal Ahsan Roll no: 2015
