Principles of Marketing
Chapter One
Creating and Capturing Customer Value
What Is Marketing?
Marketing is a process by which companies
create value for customers and build strong
customer relationships to capture value from
customers in return
e.g: mobinil & vodafone
What Is Marketing?
The Marketing Process
STEP 1: Understanding the
Marketplace
and Customer Needs
Core Concepts
1) Customer needs, wants, and demands
2) Market offerings
3) Value and satisfaction
4) Exchanges and relationships
5) Markets
Understanding the Marketplace
and Customer Needs
1. Customer Needs, Wants, and Demands
.Example : I need food , I want to eat Sushi and I can afford to buy it
Understanding the Marketplace
and Customer Needs
2. Market offerings
are some combination of products, services, information, or
experiences offered to a market to satisfy a need or want.
Examples:
City Stars ( shopping, and experience),
Disney ( entertainment , fun , knowledge and experience)
Mercedes( transportation , comfort, luxury and warranty )
Starbucks (coffee, good environment, experience)
Nike ( shoes , experience and lifestyle)
Marketing myopia
The mistake of paying more attention to the specific products a
company offers than the benefits and experiences produced by
these products.
They focus only on existing wants and lose sight of underlying
consumer needs.
They forgot that a product is only a tool to solve a consumer
problems
Understanding the Marketplace
and Customer Needs
3. Customer Value and Satisfaction
Expectations
Understanding the Marketplace
and Customer Needs
3. Customer “Value” and Satisfaction
If Performance= expectations Therefore, satisfaction.
Ex: I expected that the car will be durable for 5 years, and it really
worked for 5 years. Therefore, I am satisfied.
If Performance > expectations. Therefore, delighted.
Ex: I expected the car to be durable for 5 years and it worked for 7 years,
therefore, I am delighted.
If performance < expectations, therefore dissatisfaction
Ex: I expected the car to be durable for 5 years, and it worked for 2 years
only , therefore I am dissatisfied.
Give examples of 3 brands that delights you ,satisfy you and dissatisfy
you? Why?
Understanding the Marketplace
and Customer Needs
4. Exchange
is the act of obtaining a desired object from
someone by offering something in return
5. Markets
are the set of actual and potential buyers of a
product
STEP 2: Designing a Customer-
Driven Marketing Strategy
Marketing management is the art and science of
choosing target markets and building profitable
relationships with them.
The marketing manager’s aim 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:
◦ What customers will we serve?
◦ How can we best serve these customers?
Designing a Customer-Driven
Marketing Strategy
1-Selecting Customers to Serve
Market segmentation: refers to dividing the
markets into segments of customers
Target marketing: refers to which segments to
go after
2-Choosing a Value Proposition
The value proposition is the set of benefits or
values a company promises to deliver to customers
to satisfy their needs
It answers the question “why should I buy your
brand rather than the competitor’s”
Companies must design strong value propositions
that give them the greatest advantage in their target
markets.
2-Choosing a Value Proposition
Example:
Mercedes = Luxury
Volvo = Safety
BMW= State of the art technology
Red bull the energy drink help you fight
mental and physical fatigue. It gained 70
% of the energy drink market by
promising “It gives you wings”
Designing a Customer-Driven
Marketing Strategy
3-Marketing Management Orientations
Marketing Management Orientations
1. Production concept is the idea that consumers will
favor products that are available or highly
affordable.
Therefore, management should focus on improving
production and distribution efficiency.
2. Product concept is the idea that consumers will
favor products that offer the most quality,
performance, and features.
As the organization focuses on making continuous
product improvements.
Marketing Management Orientations
3. Selling concept is the idea that consumers will not
buy enough of the firm’s products unless it
undertakes a large scale selling and promotion
effort.
The aim often is to sell what the company makes
rather than making what the market wants.
Marketing Management Orientations
4- Marketing concept is the idea that achieving
organizational goals depends on knowing the
needs and wants of the target markets and
delivering the desired satisfactions better than
competitors do.
The job is not to find the right customers for
your product, but to find the right products for
your customers.
Marketing Management Orientations
Marketing Management Orientations
5- Societal marketing concept is the idea that a
company should make good marketing decisions by
considering consumers’ wants, the company’s
requirements, consumers’ long-term interests,
and society’s long-run interests
Example : Bottle of water.
STEP 3: Preparing an Integrated
Marketing Plan and Program
The marketing mix is the set of tools (4Ps) the firm
uses to implement its marketing strategy. It includes
product, price, promotion, and place (4Ps).
Target market
STEP 4: Building Customer
Relationships
Customer Relationship Management (CRM)
• The overall process of building and maintaining
profitable customer relationships by delivering
superior customer value and satisfaction.
• e.g:
Addidas sends u mobile sms on your birthdays
British Airways serves you the same food you like
without asking for it.
Ritz- Carlton offers you your requests base on
previous visits.
Building Customer
Relationships
Relationship Building Blocks: Customer Value and
Satisfaction
• The key to building lasting customer relationships is to
create superior customer value and satisfaction.
• Satisfied customers are more likely to be loyal customers,
which in turn results in better company performance.
STEP 5: Capturing Value
from Customers
The first four steps in the marketing process
involve building customer relationships by creating
and delivering superior customer value.
The final step involves capturing value in return, in
the form of current and future sales, market share,
and profits.
By creating superior customer value, the firm
creates highly satisfied customers who stay loyal
and buy more.
Capturing Value from Customers
The outcomes of creating customer value:
1. Customer loyalty and retention
2. Share of market and share of customer
3. Customer equity
Capturing Value from Customers
1. Creating Customer Loyalty and Retention
Customer lifetime value is the value of the entire
stream of purchases that the customer would
make over a
lifetime of
patronage
What are the most
brand you are
loyal to ? Why?
Capturing Value from Customers
2. Growing Share of Customer
Share of customer is the portion of the
customer’s purchasing that a company gets in
its product categories.
To increase share of customer, firms can offer
greater variety to current customer.
Capturing Value from Customers
3. Building Customer Equity
Customer equity is the total combined customer
lifetime values of all of the company’s current
and potential customers.
Capturing Value from Customers
3. Building Customer Equity
Building the right relationships with the right
customers involves treating customers as assets that
need to be managed and maximized. But not all
customers, not even all loyal customers, are good
investments.
Some loyal customers can be unprofitable, and
some disloyal customer can be profitable.
Different types of customers require different
relationship management strategies.
Build the right relationship with the right customers
Customer relationship groups
Butterflies True friends
Good fit between company’s Good fit between company’s
High offerings and customers needs; offerings and customers needs;
profitabilit high profit potential highest profit potential
y
Strangers Barnacles
Low Little fit between company’s Limited fit between company’s
profitabilit
y offerings and customer’s needs ; offerings and customer’s needs;
lowest profit potential low profit potential
short-term customers long-term customer
3. Building Customer Equity
The company can classify customer into one of four relationships
groups according to their profitability and loyalty.
Each group requires different relationship management strategy:
1. Stranger (low profitability and little loyalty, “don’t invest
anything in them”)
2. Butterflies (profitable but not loyal, ”we can enjoy them for only
a short while and then they are gone, create satisfying and
profitable transactions with them and then stop investing until
the next time around”)
3. True friends (are both profitable and loyal, “make a continuous
relationship investments to delight these customers and grow
them”)
4. Barnacles (highly loyal but not very profitable, “are the most
problematic customers, if they cannot be made profitable they
should be fired”)
