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Chapter 1 Marketing: creating value and capturing customer value 1)What is marketing 2)Understanding the marketplace and customer

r needs 3)Designing a customer-driven marketing strategy 4)Preparing an integrated marketing plan and program 5)Building customer relationships 6)Capturing value from customers 7)The changing marketing landscape 8) Marketing pulling it all together ~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~ 1)What is marketing
Marketing Defined
Marketing: The process by which companies create value for customers and build strong customer relationships in order to capture value from customers in return

Marketing process
Create value for customer and build customer R/S 1) Understand the marketplace and customer needs and wants 2) Design a customer-driven marketing strategy 3) Construct an integrated marketing program that delivers superior value 4) Build profitable R/S and create customer delight Capture value from customer in return 5) Capture value from customers to create profits and customer equity

2)Understanding the marketplace and customer needs


5 Core customer and marketplace concepts: o o o o o Customer Needs, wants, and demands Market offering- Products, Services, and Experiences Customer Value and Satisfaction Exchanges and R/S Markets

Customer Needs, wants, and demands


Needs: Needs are state of felt deprivation includes physical, social and individual needs Wants: The form human needs take as they are shaped by culture and individual personality Demands: When wants are supported by purchasing power - Company need to understand their customers needs, wants, and demands

Marketing Offerings- Products, Services, and Experiences


- Consumers needs and wants are fulfilled through Markets offerings :Some combination of products, services, information, or experiences offered to a market to satisfy a need or want. - Many sellers suffer from Marketing Myopia: The mistake of paying more attention to the specific products a company offers than to the benefits and experiences produced by these product - Seller focus too much on existing wants and lose sight of underlying customer needs - Smart marketers look beyond the attributes of products/services and create brand experiences

Customer Value and Satisfaction - Customers form expectations about the value and satisfaction that various market offerings
will deliver and buy according - Satisfied customers buy again and tell others about their good experiences - Dissatisfied customers often switch to competitors and disparage product to others - Must set the right level of expectations - If set too low, may satisfy those who buy but fail to attract buyers - If set too high, buyers will be disappointed

Exchange and Relationships


Exchange: The act of obtaining a desired object from someone by offering something in return - Marketing occur when people decide to satisfy needs and wants through exchange relationships - Goal is to retain customers and grow their business with the company - Marketers want to build strong R/S by consistently delivering superior customer value

Markets
Market: The set of all actual and potential buyers of a product or service Marketing System

Suppliers

Company

Marketing intermediaries

Consumers

Competitors

Major environmental forces

- Each partly in the system adds value for the next level

3)Designing a customer-driven marketing strategy - Once fully understands consumers/marketplace, marketing management can design a
customer-driven marketing strategy Marketing Management: The art and science of choosing target markets and building profitable R/S with them

1)Selecting Customers to serve


- Company will decide who it will serve , does this by dividing market into segments of customers ( market segmentation) - Selecting which segments it will go after ( target marketing ) - Select customer that it can serve well and profitably - In the case of excess demand, companies will practice demarketing to shift their demand temporarily or permanently

2)Choosing a value proposition - To decide how it will serve its customer differentiate and position itself in marketplace
- Value proposition: the set of benefits or values it promises to deliver to consumers to satisfy their needs. EG- BMW promises the ultimate driving machine -Value proposition differentiate one brand from another. - Companies should design strong value proposition that give them the greatest advantage in their target markets

Marketing Management Orientations


Five concepts that shapes marketing strategies:

o Production concept
- The idea that consumers will favor products that are available and highly affordable and that the organization should therefore focus on improving production and distribution efficiency - companies might run a risk of focusing too narrowly on their own operations and losing sight of the real objective , leading to marketing myopia Product concept - The idea that consumers will favor products that offer the most quality, performance, and features and that the organization should therefore devote its energy to making continuous product improvements - Focusing only on the companys product will also lead to marketing myopia Selling concept - The idea that consumer will not buy enough of firms products unless it undertakes a large-scale selling and promotion effort - Carry risk as it only focus on creating sales transactions rather than on building longterm, profitable customer R/S - to sell what the company rather than making what the market wants Marketing concept - The marketing management 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 Societal marketing concepts - The idea that a companys marketing decisions should consider consumers wants, the companys requirements, consumers long-run interests, and societys long-run interests - marketing strategy should deliver value to customers in a way that maintains or improves both the consumers and societys well-being

4)Preparing an integrated marketing plan and program


-Next, company develops marketing plans and programs, which consist of the firms marketing mix: the set of marketing tools the firm uses to implement its marketing strategy - Marketing mix tools are classified into four broad groups, called the 4 Ps of marketing o Product - To deliver on its value proposition, the firm must first create a need-satisfying market offering o Price - It must decide how much it will charge for the offering o Place - How it will make the offering available to target consumers o Promotion - Finally, it must communicate with target customers about the offering and persuade them of its merits

* The firm must blend all these marketing mix tools into a comprehensive integrated marketing program that communicates and delivers the intended value to chosen customers

5)Building customer relationships


Customer Relationship Management
Customer Relationship Management: The overall process of building and maintaining profitable customer relationship by delivering superior customer value and satisfaction - deals with all aspects of acquiring, keeping, growing customers Relationship building blocks: Customer value and satisfaction - Key to building lasting customer R/S is to create superior customer value and satisfaction Customer value o A customer buys from firm that offers the highest customer-perceived value: the customers evaluation of the difference between all the benefits and all the costs of a marketing offer relative to those of competing offers

o Customer often do not judge values and costs accurately or objectively. They act on perceived value

Customer Satisfaction

o Customer satisfaction: The extent to which a products perceived performance matches a buyers expectation o Satisfied if performance matches expectation , dissatisfied if performance fall short of expectation , highly satisfied if performance exceeds expectation o Higher level of customer satisfaction lead to greater customer loyalty which in turn results in better company performance o Delighted customer also become willing marketing partners, spreading word about their good experiences o Firm seeks to deliver high customer satisfaction relative to competitors but does NOT attempt to maximize customer satisfaction, as the aim of marketing is to generate customer value profitably Customer Relationship levels and tools o Companies can build customer relationships at many level, depending on the nature of the target market o Company with may low-margin customer may seek to develop basic R/S with them o In market with few customers and high margin, sellers want to create full partnerships with key customer o Developing customer loyalty and retention program like frequency marketing programs that reward customers who buy frequently or in large amount o Club marketing program that offer members special benefits and create member communities

The changing nature of customer relationships


Relating with more carefully selected customer

o Selective relationship management : targeting fewer, more profitable customer o Fire unprofitable customer if it cant be turn into profitable ones

Relating more deeply and interactively

o incorporating new, more interactive approaches that help build targeted, two-way
customer R/S o New communications tools that create R/S building opportunities. Eg, online communities and social network o These communications tool also poses challenge as they give consumers greater power and control, consumers have more information about brands than before o This means that firms can no longer rely on marketing by intrusion, but rather marketing by attraction- creating market offerings and messages that involve consumers rather than interrupt them

The changing nature of customer relationships - In addition to being good at customer relationship management, marketers must also be
good at partner relationship management: Working closely with partners in other company departments and outside the company to jointly bring greater value to customer Partners inside the company o Firms are linking all departments in the cause of creating customer value o Rather than assigning only sales and marketing people to customer, they are forming cross-functional customer teams Marketing Partners outside the firm o Companies today are networked companies, relying heavily on partnership with other firms o Through supply chain management, many companies are strengthening their connections with partners all along the supply chain o Success at building customer R/S also depend on how well their entire supply chain performs against competitors supply chain o Dun just treat vendors as suppliers and distributors as customer, treat both as partners in delivering customer value

6)Capturing value from customers


Creating Customer loyalty and retention - good customer R/S management creates customer delight which in turn create customer
loyalty -Losing a customer means losing its customer lifetime value: The value of the entire stream of purchases that the customer would make over a lifetime of patronage

Growing share of customer - Good customer R/S management can help marketers to increase their share of customer:
The portion of the customers purchasing that a company gets in its product categories - To increase share of customer, firms can offer greater variety to current customer, or they can create programs to cross-sell and up-sell in order to market more products and services to existing customers

Building customer equity - Aim of customer R/S management is to produce high customer equity
Customer equity: The total combined customer lifetime values of all the companys customers o Better measure of a firms performance than current sales or market share o Sales and market share reflect the past, customer equity suggests the future Building the right relationship with the right customers - Not all customer are good investment, classify customers according to their profitability and manage its R/S with them accordingly o Butterflies - High profitability , short term customer o True friends - High profitability , long term customer o Strangers - low profitability , short term customer o Barnacles - low profitability , long term customer

7)The changing marketing landscape


- How ever-changing marketplace affects both consumers and the marketers who serve them Four Major Development :

Digital Age
o Brought a new wave of communication, advertising and R/S building tools o Most dramatic new digital technology is the internet o Online marketing the fastest-growing form of marketing

Rapid Globalization o Chapter 19 The Call for more ethics and social responsibility
o Chapter 20

The growth of Not-For-Profit marketing


o Non-for-profit face stiff competition for support and membership, sound marketing can help them to attract membership and support

8) Marketing pulling it all together


Create value for customer and build customer R/S 1) Understand the marketplace and customer needs and wants

o o o o

Research customers and marketplace Manage marketing information and customer data

2) Design a customer-driven marketing strategy Select customers to serve: market segmentation and targeting Decide on a value proposition: differentiation and positioning

3) Construct an integrated marketing program that delivers superior value o 4 Ps 4) Build profitable R/S and create customer delight

o o

Customer R/S management: build strong R/S with chosen customers Partner R/S management: build strong R/S with marketing partners

Capture value from customer in return 5) Capture value from customers to create profits and customer equity

o o o

Create satisfied, loyal customers Capture customer lifetime value Increase share of market and share of customer