Principles of Marketing

Creating and
Capturing
Customer Value
CHAPTER 1
 Marketing Defined
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.

OLD view of NEW view of

marketing: marketing:
Making a sale - Satisfying
“telling and selling” customer 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 an integrated marketing program that delivers superior value.

◦ Build profitable relationships and create customer delight.

◦ Capture value from customers to create profits and customer equity.

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Core Concepts
Marketers must understand five core
customer and marketplace concepts:

◦Needs, wants, and demands

◦Market offerings
◦Value and satisfaction
◦Exchanges and relationships
◦Markets

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Needs, Wants, and Demands
Need:
State of felt deprivation including physical, social, and individual needs.
◦ Physical, social, and individual needs

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

Wants + Buying Power = Demand

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Marketing Offerings
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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Market Offerings
Products:
◦ Persons, places, organizations, information, and ideas.

Services:
◦ Activity or benefit offered for sale that is essentially intangible and does not result in
ownership.

Brand experiences:
◦ Should immerse the consumer in the brand experience and may be intensely
personal.

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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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Customer Value and Satisfaction

Care must be taken when setting

expectations for market offerings:

◦If performance is lower than expectations,

satisfaction is low.

◦If performance is higher than expectations,

satisfaction is high.

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Exchanges and Relationships
Exchange:

◦ Act of obtaining a desired object from someone by

offering something in return.
Relationships:

◦ Marketing actions build and maintain relationships

with target audiences involving an idea, product,
service, or other object. Value builds relationships.

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 What Is a Market?
A market:
◦Is 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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Marketing Management
The art and science of choosing target markets and building
profitable relationships with them.

◦Aim is to find, attract, keep, and grow

customers by creating, communicating and
delivering superior value.

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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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Selecting Customers to Serve
Market segmentation:

◦ Dividing the market into segments of

customers.
Target marketing:

◦ Selecting one or more segments to cultivate.

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Choosing a 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 Orientations
Organizations design and carry out their marketing
strategies under five alternate concepts:

◦ Production Concept

◦ Product Concept

◦ Selling Concept

◦ Marketing Concept

◦ Societal Marketing Concept

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The Marketing Concept
The marketing concept:

◦A marketing management philosophy that

holds that achieving organizational goals
depends on knowing the needs and wants of
target markets and delivering the desired
satisfaction better than competitors.

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The Societal
Marketing Concept
The societal marketing concept:

◦The idea that a company’s marketing decisions

should consider consumers’ wants, the
company’s desires, consumers’ long-run
interests, and society’s long-run interests.

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The Integrated Marketing Plan
Transforms the marketing strategy into action.
Includes the marketing mix and 4 Ps of
marketing:
◦ Product
◦ Price
◦ Placement
◦ Promotion
3 more added
. People, Process and Physical Appearance

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Building Customer Relationships
Customer relationship management:

◦ The overall process of building and maintaining

profitable customer relationships by delivering
superior customer value and satisfaction.

◦ CRM deals with all aspects of acquiring, keeping, and

growing customers.

◦ Customer value and satisfaction are key.

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Customer Perceived Value
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.

◦ Perceptions may be subjective

◦ To some customers “value” might mean paying more

to get more.

COPYRIGHT 2011, PEARSON EDUCATION INC. PUBLISHING

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AS PRENTICE-HALL
 Customer Satisfaction
Customer satisfaction:

◦ Extent to which the product’s perceived

performance matches a buyer’s expectations.
◦ High levels of customer satisfaction often leads to
consumer loyalty.

◦ Some firms seek to DELIGHT customers by exceeding

expectations.

◦ Profitability must be considered.

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Customer Relationships
Firms may choose to build relationships
at different levels.

Loyalty and retention programs build

relationships.

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Changing Nature of Relationships

Customer profitability analysis eliminates losing

customers and selects profitable ones with whom
relationships should be developed.

Firms related more deeply and interactively via blogs,

social network Web sites, e-mail, and video sharing.

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Capturing Value From Customers
Value is captured from customers via current
and future sales, market share, and profit.

◦ Superior customer value leads to highly satisfied

loyal customers who buy more.

◦ Key outcomes of customer value include

customer loyalty and retention, share of market,
share of customer, and customer equity.

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Customer Equity
The total combined customer lifetime
values of all the company’s current and
potential customers.

Manage equity by:

◦Classifying customers by projected loyalty and
potential profitability.
◦Manage each group accordingly.

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Capturing Value From Customers
Customer lifetime value
◦ The value of the entire stream of purchases
that the customer would make over a lifetime
of patronage.

Share of customer
◦ The portion of the customer’s purchasing that
a company gets in their product categories.

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Changing Marketing Landscape
The COVID-19 Scenario
The uncertain economic environment
The digital age
Rapid globalization
Sustainable marketing – call for more social
responsibility
Growth of not-for-profit marketing
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