Marketing Notes

Ms Diane Oswald

Notes are based on the course textbook:

“Princliples of Marketing – 6th, 7th or 8th European Edition”
by P. Kotler, G. Armstrong, L. C. Harris & N. Piercy

Topic A:
CREATING AND
CAPTURING CUSTOMER
VALUE
Marketing Intermediate – Diane Oswald

A. CREATING AND CAPTURING CUSTOMER VALUE

■ 1. Marketing, definition

■ 2. Customer needs, wants and demands

■ 3. Market offerings – goods, services, experiences

■ 4. Customer value and satisfaction

■ 5. Exchanges and relationships

■ 6. Markets

■ 7. Marketing management orientations

■ 8. Customer relationship management, definition

■ 9. Creating customer loyalty and retention

■ 10. Growing market and revenue share

■ 11. Building customer equity

■ 12. Marketing mix, a brief introduction, 4Ps, 7Ps

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Marketing Intermediate – Diane Oswald

Marketing is all around us

Changes in Marketing
■ Traditional forms: shopping centre, TV, magazines, direct mail

■ Newer forms: websites, apps, blogs, social media

■ Marketing is now reaching customers directly, personally and interactively.

■ Brands want to become part of your lives – Living the Brand

Who uses marketing?

■ Large for-profit firms like Unilever, Nestle, banks, hospitals, car importers

■ Non-profit organisations like schools, museums, charities

■ Government organisations

■ Politicians

What is Marketing?
Marketing is a management process which identifies, anticipates and satisfies customer
requirements efficiently and profitably.

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A.1 Marketing defined

The process by which companies create value for customers and build strong customer relationships

in order to capture value from customers in return.

The Marketing Process

Understanding the Marketplace and Customer Needs

A.2 Customer Needs, Wants and Demands

Human need: A state of felt deprivation

• Physical needs: food, clothing, warmth, safety

• Social needs: belonging, affection

• Individual needs: knowledge, self-expression

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Maslow's hierarchy of needs is a theory of psychology explaining human motivation based on the
pursuit of different levels of needs. The theory states that humans are motivated to fulfill their
needs in a hierarchical order. This order begins with the most basic needs before moving on to more
advanced needs.

Needs vs Wants
Human want: The human need shaped by culture and individual personality

People NEED to eat, but they WANT to eat different things in different countries.

People NEED clothing, but they WANT to keep warm, be stylish, follow cultural norms, show status,
express individuality. The following factors affect clothing needs and wants: Age; Climate; Occasion;
Income; and Occupation.

Customer Demands
Demands: Human wants that are backed by buying power.

According to their wants and resources, people demand products and services with benefits that
add up to the most value and satisfaction.

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A.3 Market offerings

Market offerings: Some combination of products, services, information, or experiences offered to a
market to satisfy a need or want.

Marketing offerings are not limited to physical products but also include intangible offerings with
no ownership of anything.

Marketing myopia: The mistake of paying more attention to the specific products a company offers
than to the benefits and experiences produced by these products.

When focusing only on existing wants and forgetting about underlying customer needs, companies
can fail, such as Kodak, Nokia, Blackberry.

Products, services & experiences

Customer experience: Looking beyond the attributes of the products and services and creating
brand experiences for customers.

A.4 Customer Value & Satisfaction

Customer value: The consumer’s assessment of the product’s overall capacity to satisfy his or her
needs.

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Customer satisfaction: The extent to which a product’s perceived performance matches a buyer’s
expectations.

If the product’s performance falls short of expectations, the buyer is dissatisfied.

If performance matches or exceeds expectations, the buyer is satisfied or delighted.

A.5 Exchanges & Relationships

Exchange: The act of obtaining a desired object from someone by offering something in return.

Transaction: A trade between two parties that involves at least two things of value, agreed-upon
conditions, a time of agreement and a place of agreement.

Relationship marketing: The process of creating, maintaining and enhancing strong, value-laden
relationships with customers and other stakeholders.

A.6 Markets
Market: The set of all actual and potential buyers of a product or service.

These buyers share a particular need or want that can be satisfied through exchange relationships.

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The Market System

Marketing involves serving a market of final consumers in the face of competitors.

The company and competitors research the market and interact with consumers to understand
their needs.

Then they create and send their market offerings and messages to consumers, either directly or
through marketing intermediaries.

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

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Designing a customer value-driven marketing strategy

Marketing Management: The art and science of choosing target markets and building profitable
relationships with them.

- Find, engage, keep and grow target customers

- Creating, delivering and communicating superior value

What customers will we serve? Our target market

How can we serve those customers best? Our value proposition

Selecting customers to serve

Market segmentation: Dividing the market into different segments or groups of customers

Target marketing: Selecting which segments of customers you can serve well and profitably

Choosing a value proposition

Value Proposition: The set of benefits or values a company promises to deliver to customers to
satisfy their needs.

 Successful companies emphasise the value of their value proposition by focusing on price,
product or convenience.
 Exceptional companies have a second priority that they balance with the first.
 Trying to give everything away for nothing will end up in bankruptcy.

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Differentiation & Positioning

Why should customers buy your product and not your competitor’s?

A.7 Marketing Management Orientations

■ Production concept

The idea that consumers will favour products that are available and highly affordable and that the
organization should therefore focus on improving production and distribution efficiency.

■ Product concept

The idea that consumers will favour products that offer the most quality, performance, and features
and that the organization should therefore devote its energy to making continuous product
improvements.

■ Selling concept

The idea that consumers will not buy enough of the firm’s products unless it undertakes a large-
scale selling and promotion effort.

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■ Marketing concept

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

Marketing vs Selling

The Societal Marketing Concept

The idea that a company’s marketing decisions should consider consumers’ wants, the company’s
requirements, consumers’ long-run interests, and society’s long-run interests.

A.8 Customer Relationship Management

The overall process of building and maintaining profitable customer relationships by delivering
superior customer value and satisfaction.

Customer relationship building blocks: Value and Satisfaction lead to Loyalty

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Customer-perceived value
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. Value might mean sensible products at affordable prices.
Value might mean paying more to get more.

Customer Satisfaction
The extent to which a product’s perceived performance matches a buyer’s expectations.

 Promise only what you can deliver, then deliver more than you promise.
 Customer satisfaction comes from how well a company delivers on its basic value
proposition and helps customers solve their buying problems.

Customer Relationship Levels and Tools

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Engaging customers
Customer-engagement marketing

– Making the brand a meaningful part of consumers’ conversations and lives by fostering direct
and continuous customer involvement in shaping brand conversations, experiences and
community.

– Going beyond just selling a brand to consumers.

– The goal is to make the brand a meaningful part of consumers’ conversations and lives.

– The key is to find ways to enter consumers’ conversations with engaging and relevant brand
messages.

Consumer-generated marketing

– Brand exchanges created by consumers themselves – both invited and uninvited – by which
consumers are playing an increasing role in shaping their own brand experiences and those of
other consumers.

– Invited: Companies asking consumers for new product ideas.

– Uninvited: Consumer blogs and videos.

– Can be used in promotion, with consumers creating content for advertising.

– However, this can be time-consuming and costly since the quality is often very low and the
messages can be negative.

– Consumers have control over social media so inviting their input can backfire.

Partner Relationship Management

■ Working closely with partners in other company departments and outside the company to
jointly bring greater value to customers.

■ Internal: Every functional area in the organisation can interact with customers, so all
departments must understand the importance of creating customer value.

■ External: Partnering with suppliers, distributors, retailers and others who connect the
company to its consumers.

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A.9 Creating Customer Loyalty and Retention

Good customer relationship management creates customer delight.

Delighted customers remain loyal and talk favourably to others about the company and its products.

Studies show big differences in the loyalty of customers who are less satisfied, somewhat satisfied,
and completely satisfied.

Even a slight drop from complete satisfaction can create an enormous drop in loyalty.

The aim of customer relationship management is to create not only customer satisfaction but also
customer delight.

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Customer Lifetime Value

Customer lifetime value: The value of the entire stream of purchases a customer makes over a
lifetime of patronage.

Loyal customers spend more and stay longer.

Research shows it is 5 times cheaper to keep an old customer than to acquire a new one.

Customer delight creates an emotional relationship with the brand, not just a rational preference.

A.10 Growing market and revenue share

Market share is calculated by taking the company's sales over the period and dividing it by the total
sales of the industry over the same period.

Your company’s market share can grow in the following ways:

 Taking market share from your competitor – by offering a better value proposition to your
customers, they can switch from your competitor’s brand to your brand.
 Getting new customers to buy your product – by introducing new customers to the market,
the total market is growing and if they buy your product then your market share grows.
 Acquire a competitor – when your company buys another company that is a competitor, the
market share grows as it is combined.

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Growing share of customer

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

To increase share of customer, companies offer greater variety to current

customers, create programs to cross-sell and up-sell to market more
products and services to existing customers.

For example, Amazon.com:

– Originally an online bookseller, offers customers music, videos, gifts, toys, consumer electronics,
office products, home improvement items, lawn and garden products, apparel and accessories,
jewellery, tools, and even groceries.

– Based on each customer’s purchase history, previous product searches, and other data, the
company recommends related products that might be of interest. This recommendation system
influences up to 30 percent of all sales.

– In these ways, Amazon.com captures a greater share of each customer’s spending budget.

A.11 Building customer equity

Customer equity: The total combined customer lifetime values of all of the company’s customers.

It is a measure of the future value of the company’s customer base.

The more loyal the company’s profitable customers, the higher its customer equity.

Whereas sales and market share reflect the past, customer equity suggests the future.

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Building the right relationship with the right customers

Companies should view customers as assets that must be managed and maximized.

Not all customers, not even all loyal customers, are good investments.

Some loyal customers can be unprofitable, and some disloyal customers can be profitable.

Which customers should the company acquire and retain? Different types of customers require
different relationship management strategies.

The goal is to build the right relationships with the right customers.

“Strangers” show low potential profitability and little projected loyalty. The relationship
management strategy for these customers is simple: Do not invest anything in them.

“Butterflies” are potentially profitable but not loyal. Efforts to convert butterflies into loyal
customers are rarely successful. Instead, the company should create satisfying and profitable
transactions with them, capturing as much of their business as possible in the short time during
which they buy from the company.

“True friends” are both profitable and loyal. The company needs to make continuous relationship
investments to delight these customers and nurture, retain, and grow them. It wants to turn true
friends into customers who come back regularly and tell others about their good experiences with
the company.

“Barnacles” are highly loyal but not very profitable. Barnacles are perhaps the most problematic
customers. The company might be able to improve their profitability by selling them more, raising
their fees, or reducing service to them.

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A.12 Marketing mix, a brief introduction, 4Ps, 7Ps

Products
The goods-and-services combination being offered to the target market

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Price
The amount of money customers must pay to obtain the product

Place
Company activities that make the product available to target consumers

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Promotion
Company activities that make the product available to target consumers

The 4 Ps  the 4 Cs

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The Marketing Mix – Services

People
Service experiences involve people interacting with people and building relationships

Physical Evidence
Services are mostly intangible so other items are needed for customer satisfaction

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Process
Customers and technology are often involved in the process of creating and enjoying experiences

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The Marketing Mix

Case Study

What is Marketing put together?

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Other definitions covered in Topic A

Sellers market: when the suppliers are in a better position as demand exceeds supply due to the fact
that there are more buyers than sellers. Sellers command what they will produce, at what quantity,
how much they will sell it for and when and where to sell their product.

Buyers market: when the customers are at an advantage as they can choose from the different
suppliers which are in abundance. Supply exceeds demand as competition is fierce. Sellers no longer
dictate the product price, but still have some control over what to produce as long as there is
demand.

Non-Profit Organisation: an incorporated organisation which exists for either educational or

charitable reasons. The trustees or shareholders do not benefit financially from its activities.

 Primary goal is not to make profit for the benefit of the owners
 Normally a service either to educate or to support accessibility
 Marketing is required to ensure that goals are attained
 Facilitates services through negotiation
 Mostly manned by volounteers, which could lead to conflicts with full-time staff

Four tasks of marketing

1. Analysis – SWOT and PEST
2. Planning -select target markets, programmes and tactics
3. Implementation – select staff, allocate tasks and responsibilities, budget, secure finances
and resources and put plan into action
4. Control – measuring and evaluating progress against objectives and targets set in your plan

The role of the Marketing Department

 Act as intermediaries between company and customers
 Formulate marketing business plans based on market information and facts
 Ensure all decision making throughout the company reflects both company and marketing
plans

Marketing as a corporate business philosophy

 Customer is always at the centre of business plans
 Proper training for employees to achieve integrated marketing
 Open door policy, better communication
 Long term profits through customer satisfaction

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