Chapter 1: Value and the Marketing Concept

Marketing:
Organizational function and a set of processes for creating, communicating, and delivering
value to customers and for managing customer relationships in ways that benefit the
organization and its stakeholders.

marketing concept
Company-wide consumer orientation with the objective of achieving long-run success.

The marketing concept is often distilled down to “give the customer what he or she wants.”

Marketing is successful when it draws on customers’ basic needs and wants, whether those are -
business-related or personal. 

corporate social responsibility

Physical evidence of a service, including the physical facilities, tools, and equipment used to
provide the service.

Value.
The enduring belief shared by a society that a specific mode of conduct is personally or socially
preferable to another mode of conduct.
product
Bundle of physical, service, and symbolic attributes designed to satisfy a customer’s wants and
needs

need
Imbalance between a consumer’s actual and desired states.

In marketing, value goes two ways. That’s because marketing can happen only when value is
exchanged between a customer and a seller. The customer receives value from the product that
the seller provides, which satisfies the customer’s need. The seller receives value in the form of
the compensation (usually, but not always, money) that the customer pays for the product.

Customer value
The relationship between benefits and the sacrifice necessary to obtain those benefits.

markets
Group of people with sufficient purchasing power, authority, and willingness to buy.

benefits
Actual factors such as design and performance, or perceived factors such as image, reputation,
and popularity, that satisfy what a customer wants or needs.

price
Exchange value of a good or service.

Accurately pinpointing how individual customers perceive value is nearly impossible. So

companies need to create value using widely accepted criteria. The two most obvious criteria for
value, for most people, are

1. the benefits offered, more broadly defined as quality.

2. the sacrifice required to obtain the benefits, typically described as price.

That is the value equation, expressed as value =benefits/price, and it holds true time and time
again.

value equation
The ratio between the benefits offered and the sacrifice required (usually based on money).
value =benefits/price
The value that a customer believes a product has is determined by what they paid or sacrificed
in return for the benefits they received.

profitability
The ability to earn a profit which is what is left from the revenue (selling price of the product)
after all expenses/costs of bringing the product to market have been paid.

The first CRM, Customer Relationship Marketing, focuses on developing a way that companies
can track their customers. Often this type of CRM focuses on creating a database and
establishing a trusted and up-to-date means of keeping track of a company’s customer base.

Customer Relationship Marketing

Creating a database and establishing a trusted and up-to-date means of keeping track of a
company’s customer base.

Customer Relationship Management.

Combination of strategies and tools that drive relationship programs, reorienting the entire
organization to a concentrated focus on satisfying customers

The other type of CRM in marketing is called Customer Relationship Management. Here the

focus is on building loyalty from the information derived from customers. This CRM is almost
always described as a process, usually in three or four steps. It outlines how data derived from
certain customers—those that an organization has established a relationship with—can be used
to drive future marketing efforts. This process requires cooperation among an organization’s
sales, marketing, operations, and IT departments to create a cohesive approach.

value proposition
An organization’s statement that outlines why a customer should buy a product.

product quality
The features and characteristics of a product that a manufacturer can control and are desirable
to the customer.

customer service
All interactions between an organization and its customer before, during and after the sale of a
product. Customer service adds value to a product.

These days, a company’s value proposition must go beyond product quality, attractive pricing,

sterling customer service, and seamless convenience. Consumers want all that, but they want to
get it with a clean conscience. They want to do business with firms that bring them amazing
value without compromising social well-being or the environment.
production orientation

Business philosophy stressing efficiency in producing a quality product, with the attitude toward
marketing that “a good product will sell itself”.

sales orientation
Belief that consumers will resist purchasing nonessential goods and services, with the attitude
toward marketing that only creative advertising and personal selling can overcome consumers’
resistance and persuade them to buy.

Marketing has gone through various orientations over the years, most notably

 the production orientation, which developed in the early twentieth century during a

time of high invention and production of goods
 thesales orientation, which evolved in the mid-twentieth century as companies fought
over market share through the “sales pitch”
 the marketing orientation, which broke through in the late twentieth century when
firms realized there was only one true way to capture customers’ hearts: by identifying
and satisfying their needs

ethical behaviour
Moral standards of behaviour expected by a society.
culture
Values, beliefs, preferences, and tastes handed down from one generation to the next.

stakeholders
A person, group, or organization that has an interest or concern in an organization/company;
for example, customers, employees, suppliers, the community, and the unions.

margins
The difference between the cost of making and bringing a product to market and its selling
price

Producing products responsibly often results in higher costs and lower margins. It’s generally
agreed, though, that the alternative—ignoring CSR—eventually leads to much costlier outcomes.
For example, regulatory non-compliance could result in fines or shutdowns, and general social
distrust could trigger consumer boycotts.
profit
Revenue minus expenses.

triple bottom line

Financial, social, and environmental effects of a firm’s policies and actions that determine
whether an organization is behaving in a sustainable manner.