CHAPTER 1

Marketing: Creating and Capturing

Customer Value

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Chapter Overview
1. Define marketing and the marketing process.
2. Explain the importance of understanding customers
and identify the five core marketplace concepts.
3. Identify the elements of a customer-driven
marketing strategy and discuss the marketing
management orientations.
4. Discuss customer relationship management and
creating value for and capturing value from
customers.
5. Describe the major trends and forces changing the
marketing landscape.

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 Case Study – Proctor and Gamble
Value Creation for Tide
 History: Tide is an innovative
brand, historically positioned on
the basis of superior functional
performance.
 At Issue: Competitors can copy
product benefits quickly, but can
not copy feelings toward the
brand.
 Challenge: Understand what the
brand name means to consumers
and how it fits into their lives.
 Goal: “Speak eye-to-eye with
consumers.”
Building Relationships
 Research Process: Explored
emotional connections women have
with their laundry via consumer
immersion.
 Findings: Women are linked
emotionally to clothing. Fabrics allow
women to express their attitidues,
personality, and multiple faces of
being female.
 “Tide Knows Fabrics Best”:
Campaign featured in rich visual
imagery and meaningful emotional
connections.
 Result: 7% sales increase. 3
What Is Marketing?
Simple Definition:
Marketing is managing profitable
customer relationships.

Goals:
3. Attract new customers by promising
superior value.
4. Keep and grow current customers by
delivering satisfaction.
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 Marketing Defined
 A social and managerial process by
which individuals and groups obtain
what they need and want through
creating and exchanging products and
value with others.
OLD View NEW
New View
View
of Marketing: of
ofMarketing:
Marketing:
Making a Sale – Satisfying
Satisfying
“Telling & Selling” Customer
customerNeeds
needs
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The Marketing Process
 A simple model of the marketing process:
 Understand the marketplace and customer needs
and wants.
 Design a customer-driven marketing strategy.
 Construct a marketing program that delivers
superior value.
 Build profitable relationships and create customer
delight.
 Capture value from customers to create profits
and customer quality.
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 Needs, Wants, & Demands

 Need:
State of felt deprivation including
physical, social, and individual needs.
 Physical needs:
 Food, clothing, shelter, safety
 Social needs:
 Belonging, affection
 Individual needs:
 Learning, knowledge, self-expression

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 Needs, Wants, & Demands

 Wants:
Form that a human need takes, as
shaped by culture and individual
personality.

 Wants + Buying Power = Demand

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Need / Want Fulfillment
 Needs and wants are fulfilled through a
Marketing Offer:

 Some combination of products, services,

information, or experiences offered to a
market to satisfy a need
or want.

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 Need / Want Satisfiers
 Products:  Services
 Persons  Activity or benefit
 Places offered for sale that is
essentially intangible
 Organizations and does not result in
 Information ownership.
 Ideas
 Brand Experiences:
“. . . dazzle their senses, touch their hearts,
stimulate their minds.”
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Marketing Myopia
 Marketing myopia occurs when sellers
pay more attention to the specific
products they offer than to the benefits
and experiences produced by the
products.

 They focus on the “wants” and lose

sight of the “needs.”
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 Value & Satisfaction
 Care must be taken when setting
expectations:

 If performance is lower than expectations,

satisfaction is low.
 If performance is higher than expectations,
satisfaction is high.

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 Exchange vs. Transaction
 Exchange:  Transaction:
 Act of obtaining a  A trade of values
desired object between two
from someone by parties.
offering something
 One party gives X
in return. to another party
and gets Y in
return. Can include
cash, credit, or
check.
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What Is a Market?
 The set of actual and potential buyers
of a product.

 These people share a need or want that

can be satisfied through exchange
relationships.

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 Modern Marketing Systems
 Main elements in a modern marketing
system include:
 Suppliers
 Company (marketer)
 Competitors
 Marketing intermediaries
 Final users

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 Marketing Management
 The art and science of choosing target
markets and building profitable
relationships with them.
 Requires that consumers and the marketplace
be fully understood
 What Customers Will We Serve?
 How will we Serve them Best? (Our VALUE
Proposition)

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 Marketing Management
 Designing a winning marketing strategy
requires answers to the following
questions:
1. What customers will we serve?
What is our target market?
2. How can we best serve these
customers?
What is our value proposition?

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 Segmentation & Target Marketing

 Market Segmentation:
 Divide the market into segments of
customers

 Target Marketing:
 Select the segment to cultivate

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 Marketing Management
 Demand  Demarketing
Management  Temporarily or
 Finding and permanently
increasing demand, reducing the
also changing or number of
reducing demand, customers or
as in demarketing. shifting their
demand.

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Value Proposition
 The set of benefits or values a company
promises to deliver to consumers to
satisfy their needs.
 Value propositions dictate how firms will
differentiate and position their brands in
the marketplace.

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 Marketing Management
Philosophies

 Production Concept
 Product Concept
 Selling Concept
 Marketing Concept
 Societal Marketing Concept

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The Marketing Plan
 Transforms the marketing strategy into
action
 Includes the marketing mix and 4 P’s of
marketing:
 Product
 Price
 Place (Distribution)
 Promotion
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Customer Relationship Management

 The overall process of building and

maintaining profitable customer
relationships by delivering superior
customer value and satisfaction.
 Acquiring customers
 Keeping customers
 Growing customers

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Customer Perceived Value
 Customer’s evaluation of the difference
between all of the benefits and all of
the costs of a marketing offer relative to
those of competing offers.

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Customer Satisfaction
 Dependent on the product’s perceived
performance relative to a buyer’s
expectations.
 Customer satisfaction often leads to
consumer loyalty.
 Some firms seek to DELIGHT customers by
exceeding expectations.

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Customer Relationships
 Loyalty and retention programs build
relationships and may feature:
 Financial Benefits
 EX: Frequency marketing programs
 Social Benefits
 EX: Club marketing programs
 Structural Ties
 Focus is on relating directly to profitable
customers, for the long term.
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Partner Relationship Marketing

 Marketing partners help create customer

value and assist in building customer
relationships.
 Partners inside the firm:
 All employees customer focused
 Teams coordinate efforts toward customers
 Partners outside the firm:
 Supply chain management
 Strategic alliances
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 Customer Loyalty & Retention
 Customer  Share of
Lifetime Value Customer
 The entire stream  The share a
of purchases that company gets
the customer of the customers
would make over purchasing in
a lifetime of their product
patronage. categories.

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Customer Equity
 The combined discounted customer
lifetime values of all the company’s
current and potential customers.
 Classify customers by loyalty and potential
profitability
 Manage accordingly

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New Marketing Landscape
 The New Digital Age
 Rapid Globalization
 Ethics and Social Responsibility
 Not-for-Profit Marketing
 New World of Marketing Relationships

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 The New Digital Age
 Technology impacts the ways firms bring value to
their customers.
 Greater connectivity means greater access to
information, faster travel and communication.
 The Internet allows anytime, anywhere
connections between firms and customers.
 “Click-and-mortar” companies
 “Click-only” companies
 Business-to-business e-commerce

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You Should Now be Able to:
1. Define marketing and the marketing process.
2. Explain the importance of understanding customers
and identify the five core marketplace concepts.
3. Identify the elements of a customer-driven
marketing strategy and discuss the marketing
management orientations.
4. Discuss customer relationship management and
creating value for and capturing value from
customers.
5. Describe the major trends and forces changing the
marketing landscape.

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