MARKETING: CREATING

AND CAPTURING
CUSTOMER VALUE

Chapter 1
Chapter 1 Outline
 What is Marketing?
 Understanding the Marketplace and Customer Needs
 Designing a Customer-Driven Marketing Strategy
 Preparing an Integrated Marketing Plan and
Program
 Building Customer Relationships
 Capturing Value from Customers
 The changing Marketing Landscape
What is Marketing?
 Marketing is the process by which companies
create value for customers and build strong
customer relationships in order to capture value
from customers in return.
 Value which is a key marketing concept is
primarily a combination of quality, service, and
price (qsp).
 Not only selling and advertising
What is Marketing?
 It is about satisfying customer needs
 If marketers understand consumer needs and

develop products that provide superior

customer value and prices, distributes, and
promotes them effectively, these products will
sell easily.
The Marketing Process
1. Understand the marketplace and customer needs
and wants
2. Design a customer driven marketing strategy
3. Construct an integrated marketing program that
delivers superior value
4. Build profitable relationships and create customer
delight
5. Capture value from customers to create profit and
customer equity.
The Marketing Process
 In the first four steps, companies work to
understand consumers, create customer value, and
build customer relationships.
 In the final step, companies gain the rewards of
creating superior customer value.
1. Understanding the Marketplace and Customer
Needs

 Outstanding marketing companies work hard to

understand their customers’ needs, wants, and
demands.
 Research customers and the marketplace
 Manage marketing information and customer data
 People at all levels of the company including top
management must stay close to customers.
Needs ,Wants, and Demands
 What Motivates a Consumer to Take Action?
 Needs - A state of felt deprivation for basic items
such as food and clothing and complex needs such as
for belonging. i.e. I am thirsty
 Wants - The form that a human need takes as
shaped by culture and individual personality. i.e. I
want a Coca-Cola.
 Wants are shaped by a person’s society and are
described in terms of objects that will satisfy a
person’s needs
Needs ,Wants, and Demands
 Demands - human wants backed by buying
power. i.e. I have money to buy a Coca-Cola.
Demands ( Example )

 There are two options, you either buy a Samsung’s or Apple’s

product.
 Though, the prices are really different. The Samsung’s phone costs
$150 and the Apple’s iPhone $780.
 We’d prefer to purchase the Apple product, but the question is,
can we?
 If we, financially, are strong enough and can allow ourselves to buy
a $780 iPhone, it means that we’ve transformed our want/need into
a demand.
 So, the key difference between wants and demand is desire.
Consequently, for people, who can afford a desirable product are
transforming their wants into demands.
Market Offerings
 Market offerings-some combination
of products, services, information, or
experiences offered to market to a
satisfy a need or a want
Market Offerings

 Products/ - anything  Services -

that can be offered to a activities or benefits
market for attention, offered for sale that
acquisition, use or are essentially
consumption and that intangible and don’t
might satisfy a need or
want. E.g. Tangible
result in the ownership
products of anything.
 Other forms of products:
 Examples: banking,
persons, places, airlines, haircuts, and
organizations, hotels.
information, and ideas.
Market Offerings
 Marketing Myopia- The mistake of paying more
attention to the specific products a company offers
rather than to the benefits and experiences
produced by these products.
 Focus only on existing wants and lose sight of
underlying customer needs.
 Customers will have the same need but will want a
new product
Customer Value and Satisfaction Expectation

 Customers form expectations about the value and

satisfaction that various market offerings will
deliver and buy based on these expectations.
 Marketers must set the right level of expectations.
 If expectations are too low, they may satisfy those
who buy their products but they will not attract
enough buyers
 If expectations are too high, buyers will be
disappointed.
How do Consumers Obtain
Products and Services?

 Exchanges - act of obtaining a desired object from

someone by offering something in return.
 Marketing occurs when people try to satisfy their
needs and wants through exchange relationships.
 Relationships - building long-term relationships
with consumers, distributors, dealers, and suppliers.
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.
2. Designing a Customer-Driven Marketing Strategy

 Marketing Management is the art and science of

choosing target markets and building profitable
relationships with them.
 Target markets are the consumers a company

wants to sell its products and services to, and to

whom it directs its marketing efforts.
 A marketing manager job is to find, attract, keep,

and grow target customers by creating, delivering,

and communicating superior customer value.
2. Designing a Customer-Driven Marketing Strategy

 To design a winning marketing strategy, the

marketing manager must answer two important
questions.
 What customers will we serve ( target markets)?
 How can we serve these customers best (what’s our
value proposition) ?
Selecting Customers to Serve
 Divide markets into segments of customers (market
segmentation)
 Select which segments the company will go after
( target marketing)
 Companies should only select customers that they
can serve well.
Choosing a Value Proposition
 The company must decide how it will serve
targeted customers
 How it will differentiate and position itself in the
marketplace?
 Value proposition is the set of benefits or values the
company promises to deliver to consumers to
satisfy their needs.
Marketing Management Orientations

 The Production Concept is the idea that

consumers will favor products that are available
or highly affordable.
 Improving production and distribution efficiency

 The Product Concept is the idea that

consumers will favor products that offer the

most quality, performance, and features.
 Continuous product improvement
Marketing Management Orientations

 The 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.
 Unsought goods: are goods that the consumer does
not know about or does not normally think of buying.
E.g. fire extinguishers, reference books, funeral services
Marketing Management Orientations

 The 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.
 Find the right product for your customer
Marketing & Sales
Concepts Contrasted
Starting Focus Means Ends
Point

Selling Profits
Existing
Factory and through
Products
Promoting Volume
The Selling Concept

Profits
Customer Integrated
Market through
Needs Marketing
Satisfaction
The Marketing Concept
The Societal Marketing Concept
 The societal marketing concept states that
marketing strategies should deliver value to
customers in a way that maintains or improves
both the consumer and society’s well-being.
 Sustainable marketing socially and

environmentally responsible marketing that

meets the present needs of consumers and
businesses while also improving the ability of
future generations to meet their needs.
The Societal Marketing Concept
 Companies should balance three considerations in
setting their marketing strategies.
 Company profit
 Consumer wants
 Society’s interests
The Societal Marketing Concept
3. Preparing an Integrated Marketing Plan and
Program

 Companies must develop an integrated

marketing programs to deliver on their
value propositions to target customers
The Four Ps of Marketing
 To deliver on its value proposition, a company
must:
 Create a need-satisfying market offering (product)
 Make the offering available to target consumers
( place)
 Decide how much it will charge for the offering
(price)
 Communicate with target market (promotion)
4. Building Customer Relationships

 Building and managing profitable customer relationships is

the most important step.
 Customer Relationship Management (CRM) is the overall
process of building and maintaining profitable customer
relationships by delivering superior customer value and
satisfaction.
 Customer Relationship management involves managing
detailed information about individual customers and
carefully managing customer touch points (where a
customer directly or indirectly interacts with the company
in some form)
4. Building Customer
Relationships
 Example of a Hotel’s customer touch points:
Internet and phone reservation, Hotel website,
Hotel reception, check-in process, room service,
laundry service, restaurants, and checkout
processes.

 Think of a business or a company and give three

examples of its customer touch points.
How Do Consumers Choose
Among Products and
Services?

• Customer-perceived value is 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.
How Do Consumers Choose
Choose Among Products and
Services?

 Customer Satisfaction - depends on the product’s

perceived performance in delivering value relative to a buyer’s
expectations.
 If the performance falls short of expectation, the customer is
disappointed.
 If the performance matches expectations, the customer is satisfied.
 If the performance exceeds expectations, the customer is
delighted.

 Smart companies aim to delight customers by promising only what they can
deliver and then delivering more than they promise.
Customer Relationship Levels and Tools

 Basic relationships-many low margin customers

 Full partnerships- few high margin customers
 Frequency marketing program: is a marketing strategy
which is used to retain customers for a long term.
 Frequency marketing includes events like advertising at frequent
intervals, giving discounts to loyal customers, organizing events etc.
 Club marketing programs: designed specifically for
regular and frequent purchasers of a company's product or for
those who have a special interest in it; these consumers, who may
be automatically enrolled or invited to apply for club membership,
are usually offered special prices or other incentives to reward
them.
The Changing Nature of Customer Relationships

 Relating with more carefully selected customers

using selective relationship management to target
fewer, more profitable customers.
 Firing unprofitable customers
 Relating more deeply and interactively by
incorporating more interactive two way
relationships through blogs, Websites, online
communities and social networks.
The Changing Nature of Customer Relationships

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.
The Changing Nature of Customer Relationships

 Many companies are creating dialogues with

consumers using their own online social networks.
 Example: Facebook, Twitter, and YouTube
 Consumer-generated marketing-Brand exchanges
created by consumers that results in consumers playing
a bigger role in shaping their own brand experience
and those of other consumers. The results of this are:
 New product and service ideas
 More active role in shaping ads
The Changing Nature of Customer Relationships

 Partner relationship management involves

working closely with partners in other company
departments and outside the company to jointly
bring greater value to customers.
The Changing Nature of Customer Relationships

 Partner Relationship Management

 Partners inside the company is every function area
interacting with customers.
 Cross-functional teams
 Partners outside the company is how marketers
connect with their suppliers, channel partners, and
competitors by developing partnerships.
The Changing Nature of Customer Relationships

 Partner Relationship Management

 Supply chain is a channel that stretches from raw
materials to components to final products to final
buyers.
 Supply chain management-companies are now
building stronger relationships with partners along
the supply chain.
The Supply Chain
Supplier(raw material or components)


Transportation(inbound logistics)


Manufacturer


Transportation (outbound logistics)



Warehousing


Wholesaler


Retailer


Final consumer

5. Capturing Value from Customers
 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
 It is five time more expensive to obtain a new
customer than to keep an existing customer
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 customers, companies can offer
greater variety to current customers or create programs to
cross-sell and up-sell.
 Cross-sell-The practice of suggesting related products or
services to a customer who is considering buying
something.
 Up-sell- Sellers attempt to persuade customers to buy a
more expensive item.
Building Customer Equity
 Customer equity is the total combined customer
lifetime values of all of the company’s customers.
 The more loyal a firm’s profitable customers, the
higher its customer equity.
Q1:
 ________ is defined as a social and managerial process
by which individuals and organizations obtain what they
need and want through value creation and exchange.
 A) Selling
 B) Advertising
 C) Bartering
 D) Marketing
 E) Negotiating
 Answer: D
Q2:
 Which steps of the five-step marketing process are
about understanding customers, creating customer
value, and building strong customer relationships?
 A) the first two only
 B) the first three only
 C) the first four only
 D) the last three only
 E) the last four only
 Answer: C
 According to the simple five-step model of the
marketing process, a company needs to ________
before designing a customer-driven marketing
strategy.
 A) determine how to deliver superior value
 B) build profitable relationships with customers
 C) use customer relationship management to create
full partnerships with key customers
 D) understand the marketplace and customer needs
and wants
 E) construct key components of a marketing program
 Answer: D
 ________ are human needs as shaped by individual
personality and culture.
 A) Needs
 B) Wants
 C) Demands
 D) Values
 E) Exchanges
 Answer: B
Reference
 Kotler, Philip and Gary Armstrong. Principles of
Marketing. Pearson Education Limited, 2014.