Principles of Marketing

Seventeenth Edition

Chapter 1

Marketing:
Creating Customer Value and
Engagement
Learning Objective 1

Define marketing and outline the steps in the marketing

process.

https://www.digistore24.com/redir/283755/ajiteshwarshukla/
What is Marketing?
Marketing is a process by which companies create
value for customers
and build strong customer relationships in order to
capture value from customers in return.
Discussion Question

Can you give examples of either national

or local companies that are excellent at
marketing and how does it reflect the
definition given in this slide.
What is Marketing
• Perhaps the simplest definition of marketing is engaging customers and managing profitable customer relationships.

• The twofold goal of marketing is to:

• attract new customers by promising superior value

• grow current customers by delivering satisfaction

• Sound marketing is critical to the success of every organization:

• large for-profit firms

• not-for-profit organizations

• You already know a lot about marketing—it’s all around you:

• products at your nearby shopping mall

• ads that fill your TV screen and magazines, or stuff your mailbox
• imaginative web sites and mobile phone apps
• blogs, online videos, and social media

• Today’s marketers reach you directly, personally, and interactively. They want to become a part of your life and enrich your experiences
with their brands—to help you live their brands.
Learning Objective 2
Explain the importance of understanding the marketplace and
customers and identify the five core marketplace concepts.
Understanding the Marketplace and Customer Needs

Needs are states of felt

deprivation.
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.
Understanding the Marketplace and Customer
Needs
Market offerings are some
combination of products,
services, information, or
experiences offered to a
market to satisfy a need or
want.

Marketing myopia is focusing

only on existing wants and
losing sight of underlying
consumer needs.
Understanding the Marketplace and
Customer Needs
• Marketing experiences:
• More than just a sports bar, Buffalo Wild
Wings mission is to provide a total eating and
social environment that “fuels the sports fan
experience” through in-store and online
engagement. Smart marketers orchestrate
several services and products, thereby
creating brand experiences for consumers.
Understanding the Marketplace and
Customer Needs
• Marketing occurs when people decide to satisfy their
needs and wants through exchange relationships.
• Exchange is the act of obtaining a desired object from
someone by offering something in return.
• Marketing consists of actions taken to create, maintain,
and grow desirable exchange relationships with target
audiences involving a product, service, idea, or other
object.
• Companies want to build strong relationships by
consistently delivering superior customer value.
Understanding the Marketplace and
Customer Needs
Exchange is the act of obtaining a desired object from
someone by offering something in return.
Marketing actions try to create, maintain, and grow
desirable exchange relationships.
Understanding the Marketplace and Customer
Needs
A market is set of actual and potential buyers.
Consumers market when they:
– search for products
– interact with companies to obtain information
– make purchases
Understanding the Marketplace and
Customer Needs
• A market is the set of actual and potential buyers of a product or
service.
• Sellers must search for buyers, identify their needs, design good market
offerings, set prices for them, promote them, and store and deliver
them.
• Although marketing was traditionally carried out by sellers, the concept
now also includes consumers.
• Consumers engage in marketing when they search for products, interact
with companies to obtain information, and make their purchases.
• Thus, in addition to customer relationship management, companies
must also deal with customer-managed relationships as customers are
empowered and marketing is made a two-way affair.
Understanding the Marketplace
and Customer Needs
Understanding the Marketplace and
Customer Needs
• 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.

• Figure 1.2 shows the main elements in a marketing system.

• Each party in the system adds value for the next level and is affected by major environmental
forces (demographic, economic, natural, technological, political, and social/cultural).

• Marketing means managing markets to bring about profitable customer relationships.

Activities such as consumer research, product development, communication, distribution,
pricing, and service are core marketing activities.

• Buyers also carry out marketing, thus, in addition to customer relationship management,
today’s marketers must also deal effectively with customer-managed relationships.

• Marketers are no longer asking only “How can we influence our customers?” but also “How
can our customers influence us?” and even “How can our customers influence each other?”
Learning Objective 3
Identify the key elements of a customer-driven marketing strategy and discuss
the marketing management orientations that guide marketing strategy.
Designing a Customer Value-Driven Marketing
Strategy
Marketing management is the art and science of
choosing target markets and building profitable
relationships with them.
– What customers will we serve (target market)?
– How can we best serve these customers (value
proposition)?
Discussion Question

• Do you use a Gym or buy any fitness product

like clothes or shoes? Supplements?
• Describe a market segment for any of the
above that you currently use?
Designing a Customer Value-Driven Marketing
Strategy
A brand’s value proposition is
the set of benefits or values it
promises to deliver to customers
to satisfy their needs.
Discussion Question

• Evaluate one of the following value propositions in terms of how well the company delivers on the
proposition.

• BMW promises “the ultimate driving machine”

• New Balance’s Minimus shoes are “like barefoot only better.”

• Facebook helps you “connect and share with the people in your life”

• YouTube “provides a place for people to connect, inform, and inspire others across the globe.”

• The company must decide how it will serve targeted customers—how it will differentiate and
position itself in the marketplace. A brand’s value proposition is the set of benefits or values it
promises to deliver to consumers to satisfy their needs.

• Value propositions differentiate one brand from another. They answer the customer’s question,
“Why should I buy your brand rather than a competitor’s?” Companies must design strong value
propositions that give them the greatest advantage in their target markets.
Designing a Customer Value-Driven Marketing Strategy

Societal
Marketi
Productio Product Selling Marketi
ng
n concept concept concept ng
concept
concept
Designing a Customer Value-Driven
Marketing Strategy
• Marketing management wants to design strategies that will build profitable relationships with target consumers.

– Production concept: Consumers will favor products that are available and highly affordable.

• The production concept is still a useful philosophy in some situations. For example in the highly competitive, price-sensitive Chinese market,
both personal computer maker Lenovo and home appliance maker Haier dominate through low labor costs, high production efficiency, and
mass distribution.

• However, although useful in some situations, the production concept can lead to marketing myopia and losing sight of the real objective—
satisfying customer needs and building customer relationships.

– Product concept: Consumers favor products that offer the most quality, performance, and features.

• The focus is on continuous product improvements. Product quality and improvement are important parts of most marketing strategies.
However, focusing only on the company’s products can also lead to marketing myopia. For example, some manufacturers believe that if they
can “build a better mousetrap, the world will beat a path to their doors.”

• But they are often rudely shocked. Buyers may be looking for a better solution to a mouse problem but not necessarily for a better mousetrap.
• The better solution might be a chemical spray, an exterminating service, a house cat, or something else that suits their needs even better than
a mousetrap.
Designing a Customer Value-Driven
Marketing Strategy
• Selling concept: Consumers will not buy enough of the firm’s products unless the firm undertakes a large-
scale selling and promotion effort.

– The selling concept is typically practiced with unsought goods—those that buyers do not normally think of buying,
such as life insurance or blood donations. These industries must be good at tracking down prospects and selling them
on a product’s benefits.

– Such aggressive selling, however, carries high risks. It focuses on creating sales transactions rather than on building
long-term, profitable customer relationships.

• Marketing concept: Know the needs and wants of the target markets and deliver the desired satisfactions
better than competitors.

– Under the marketing concept, customer focus and value are the paths to sales and profits.

– Instead of a product-centered make-and-sell philosophy, the marketing concept is a customer-centered sense-and-

respond philosophy. The job is not to find the right customers for your product but to find the right products for your
customers.

• For societal marketing concept, see future slide.

Designing a Customer Value-
Driven Marketing Strategy
Contrasts the selling concept and the
marketing concept.
• The selling concept takes an inside-out perspective.
– It starts with the factory, focuses on the company’s existing products, and
calls for heavy selling and promotion to obtain profitable sales.
– It focuses primarily on customer conquest—getting short-term sales with little
concern about who buys or why.

• In contrast, the marketing concept takes an outside-in perspective.

– As Herb Kelleher, the colorful founder of Southwest Airlines, once put it, “We
don’t have a marketing department; we have a customer department.”
– The marketing concept starts with a well-defined market, focuses on customer
needs, and integrates all the marketing activities that affect customers.
– In turn, it yields profits by creating relationships with the right customers
based on customer value and satisfaction.
Designing a Customer Value-
Driven Marketing Strategy
Societal marketing:
The company’s
marketing decisions
should consider
consumers’ wants, the
company’s
requirements,
consumers’ long-run
interests, and society’s
long-run interests.
Designing a Customer Value-Driven
Marketing Strategy
• 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. It calls for sustainable marketing, socially and environmentally responsible
marketing that meets the present needs of consumers and businesses while also
preserving or enhancing the ability of future generations to meet their needs.

• Even more broadly, many leading business and marketing thinkers are now preaching
the concept of shared value, which recognizes that societal needs, not just economic
needs, define markets.
• Companies should balance three considerations in setting their marketing strategies:
company profits, consumer wants, and society’s interests.
Designing a Customer Value-Driven Marketing
Strategy
The marketing mix is comprised of a set of tools known a
the four Ps:
– product
– price
– promotion
– place
Integrated marketing program—a comprehensive plan
that communicates and delivers intended value
Designing a Customer Value-Driven
Marketing Strategy
• 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.
– To deliver on its value proposition, the firm must first create a need-satisfying market offering
(product). It must then decide how much it will charge for the offering (price) and how it will make the
offering available to target consumers (place). Finally, it must engage target consumers, communicate
about the offering, and persuade consumers of the offer’s merits (promotion).

• The firm must blend each marketing mix tool into a comprehensive integrated marketing
program that communicates and delivers the intended value to chosen customers.
Learning Objective 4
Discuss customer relationship management and identify strategies
for creating value for customers and capturing value from customers
in return.
Managing Customer Relationships and
Capturing Customer Value
Customer relationship management—the overall
process of building and maintaining profitable customer
relationships by delivering superior customer value and
satisfaction.
Managing Customer Relationships and
Capturing Customer Value
• The first three steps in the marketing process—understanding the marketplace and customer
needs, designing a customer value-driven marketing strategy, and constructing a marketing
program—all lead up to the fourth and most important step: building and managing profitable
customer relationships.

• We first discuss the basics of customer relationship management. Then, we examine how
companies go about engaging customers on a deeper level in this age of digital and social
marketing.

• 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.

• In the broader sense, customer relationship management is the overall process of building and
maintaining profitable customer relationships by delivering superior customer value and
satisfaction. It deals with all aspects of acquiring, engaging, and growing customers.
Learning Objective 4
Describe the major trends and forces that are changing
the marketing landscape in this age of relationships.
The Changing Marketing Landscape

• Digital and social media marketing involves using digital

marketing tools such as web sites, social media, mobile ads
and apps, online videos, e-mail, and blogs that engage
consumers anywhere, at any time, via their digital devices.
• The explosive growth in digital technology has fundamentally
changed the way we live—how we communicate, share
information, access entertainment, and shop.
• An estimated 3.3 billion people—46 percent of the world’s
population—are now online. Sixty-four percent of all American
adults now own smartphones; 71 percent of those
smartphones next to them when they sleep. These numbers
will only grow as digital technology rockets into the future.
The Changing Marketing Landscape

• Not-for-profit
marketing growth
• Rapid globalization
• Sustainable marketing

https://www.digistore24.com/redir/283755/ajiteshwarshukla/
The Changing Marketing Landscape
• In recent years, marketing has also become a major part of the strategies of many not-for-profit
organizations, such as colleges, hospitals, museums, zoos, symphony orchestras, foundations,
and even churches.
– The nation’s not-for-profits face stiff competition for support and membership. Sound marketing can help
them attract members, funds, and support.
– For example, Ben & Jerry’s three-part “linked prosperity” mission drives it to make fantastic ice cream
(product mission), manage the company for sustainable financial growth (economic mission), and use the
company “in innovative ways to make the world a better place” (social mission). Both Ben & Jerry’s and its
products are “Made of Something Better.”

• As they are redefining their customer relationships, marketers are also taking a fresh look at the
ways in which they relate with the broader world around them. Today, almost every company,
large or small, is touched in some way by global competition.

• Marketers are reexamining their relationships with social values and responsibilities and with the
very Earth that sustains us. As the worldwide consumerism and environmentalism movements
mature, today’s marketers are being called on to develop sustainable marketing practices.
So, What Is Marketing? Pulling It All
Together