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Marketing: Managing Profitable

Customer Relationships

What is Marketing?
Marketing is managing profitable customer
Attracting new customers
Retaining and growing current customers
Marketing is NOT synonymous with sales
or advertising

Marketing Defined
Marketing consists of the strategies and tactics used to
identify, create and maintain satisfying relationships with
customers that result in value for both the customer and the

Marketing is a social and managerial process by which

individuals and groups obtain what they need and want
through creating and exchanging value with others. (Kotler,

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

The Marketing Process

Understand the Design a customer Construct a marketing

market place and driven marketing program that delivers
Customer needs strategy superior value
and wants

Capture value from Build profitable

customers to create relationships and
profits and customer Create customer delight

1. Understanding the
and Consumer Needs

Core Customer and Marketplace
Needs, Wants, and Demands
Marketing Offers
Value and Satisfaction
Exchange, Transactions, and Relationships

Needs, Wants, and Demands

A state of felt deprivation. The basic human requirements
The form taken by a human needs as shaped by culture and
individual personality. Wants are described in terms of
objects that will satisfy needs
Human wants that are backed by buying power

Needs, Wants, and Demands
People need food, air, water, clothing, and shelter to survive. People
also have strong needs for creation, education, and entertainment
The above needs become wants when they are directed to specific
objects that might satisfy the need. An American needs food but may
want a hamburger, French fries, and a soft drink. A person in
Mauritius needs food but may want a mango, rice, lentils, and beans.
Wants are shaped by one's society and are described in terms of
objects that will satisfy needs
Demands are wants for specific products backed by an ability to pay.
Many people want a Mercedes; only a few are willing and able to
buy one

Marketing Offers

Some combination of products, services, information, or

experiences offered to a market to satisfy a need or want.
Marketing offers also include persons, places,
organizations, ideas

Marketing Myopia?
Focus only on existing wants and lose sight of underlying
customer needs. Forgetting the fact that product is only the
tool to solve consumer problem

Customer Value and Satisfaction

Key building blocks for developing and managing customer

Customer Value is the difference between the values the
customer gains from owning and using the product and the
costs of obtaining the product
Customer Satisfaction is the extent to which a products
perceived performance matches a buyers expectation

The set of all actual and potential buyers of a product or

Types of Market
Pure competition Many buyers and many seller trading in a uniform
commodity e.g. wheat, vegetables etc
Monopolistic competition Many buyers and sellers who trade over a
range of prices
Oligopolistic competition Few sellers who are highly sensitive to
each other pricing and marketing strategies
Pure Monopoly Market consist of one seller
Exchange, Transactions, and

The act of obtaining a desired object from someone by
offering something in return.
A trade of values between two parties

2. Designing a Customer Driven
Marketing Strategy

Marketing Management
Marketing management is the art and science
of choosing target markets and building
profitable relationships with them.
Creating, delivering and communicating superior
customer value is key.
Marketing to reduce demand temporarily or permanently; the
aim is not to destroy the demand but only to reduce or shift it.

What customers will we serve? (Target Market)
How can we serve these customers best? (Value

Value Proposition
The set of benefits or values it promises to deliver to
consumers to satisfy their needs. Answers the customers
question Why should I buy your brand rather than a
competitors? e.g. Nestle Pure drinking water, BlackBerry
connectivity on the go, K&Ns healthy and safe chicken etc

Marketing Management Orientations

Product Concept

The product philosophy holds that the organization knows

its product better than anyone or any organization. The
company knows what will work in designing and producing
the product and what will not work. This confidence in their
ability is not a radical concept, but the confidence leads to
the consumer being overlooked.
Dominant era: Prior to the Industrial Revolution and
continued to the 1920s

Marketing Management Orientations

Production Concept
Demand for a product is greater than
To increase profit, focus on production efficiencies
knowing all output can be sold. Also useful concept
when increasing production raises economies of scale
etc. to reduce price. Henry Ford, "Doesn't matter what
color car you want, as long as it is black."...A typical
quote during the production era.
Dominant era: From mid C19th to early C20th,
industrial revolution etc.

Marketing Management Orientations

Selling Concept
Demand for a product is equal to supply.

- Emphasis is needed to sell the product to increase profits. Focus on

- Useful for unsought goods, i.e., encyclopedias, funeral plots. Political
candidates, selling important, not post consumer satisfaction.
- Dominant era: 1920's to Mid 1930's WWII to early 1950's

Marketing Management Orientations

Marketing Concept
Supply for a product is greater than
demand, creating intense competition
among suppliers.
- Company first determines what the consumer wants, then
produces what the consumer wants, then sells the consumer
what it wants.
- Dominant era: 1930's to WWII 1950's to present.

Marketing Concept

LL Bean 1912, founded on the marketing concept, in his first circular:

"I do not consider a sale complete until goods are worn out and the
customer still satisfied. We will thank anyone to return goods that are
not perfectly satisfactory...Above all things we wish to avoid having a
dissatisfied customer."

Marketing Concept

To illustrate the marketing era/concept Peter Drucker, in

1954 said:

if we want to know what business is we must first start

with its purpose...There is only one valid definition of
business purpose: to create a customer. What business
thinks it produces is not of first importance-especially not
to the future of the business or to its success. What the
customer thinks he/she is buying, what he/she considers
"value" is decisive-it determines what a business is, what it
produces, and whether it will prosper."

-Peter Drucker, The Practice of Management, 1954, P.37

Marketing Concept

John B McKitterick, President of General Electric, 1957, addressing

the AMA said:

It is customer oriented, integrated, profit oriented philosophy of


The Customer is King

Marketing Management Orientations

The Societal marketing concept

Focus on other stakeholders, as well as the business and its customers.

Need to balance 3 items
Company profits
Customer wants
Society's interests

The difference between short term consumer wants and long term
consumer welfare.

Marketing Management Orientations

What era are we in now?

We are still essentially in the marketing era, since that is the dominant
concept, but increasing pressure is being put on to companies to adopt the
societal concept.

Importance of the marketing concept

According to the Customer Service Institute, it costs as much as five times

as much to acquire a new customer than it does to service an existing one.
Customers tell twice as many people about a bad experience over a good
According to the American Marketing Association (AMA), for an average
company, 65% of its business comes from its presently satisfied customers.

Preparing a Marketing Plan and

Building Customer

CRM - Customer Relationship Management
is the overall process of building and
maintaining profitable customer relationships
by delivering superior customer value and


It costs 5 to 10 times MORE to attract a

new customer than it does to keep a current
customer satisfied.
Marketers must be concerned with the
lifetime value of the customer.

Capturing Value from

Creating Customer Loyalty and
Key Concepts Customer value/satisfaction
Perceptions are key
Attracting, retaining and expectations creates
growing customers satisfaction
Loyalty and retention
Benefits of loyalty
Loyalty increases as
satisfaction levels increase
Delighting consumers should
be the goal
Growing share of customer
Cross-selling 32
Key Concepts Customer equity
The total combined
Building customer customer lifetime values
relationships and customer of all customers.
equity Measures a firms
performance, but in a
manner that looks to the

Key Concepts Customer relationship levels
and tools
Building customer Target market typically
relationships and customer dictates type of relationship
equity Basic relationships
Full relationships
Customer loyalty and
retention programs
Adding financial
Adding social benefits
The New Marketing Landscape

Technological advances, rapid globalization, and

continuing social and economic shifts are causing
marketplace changes.

Major marketing developments can be grouped

under the theme of Connecting

Marketing Challenges
Connecting Advances in computers,
telecommunications, video-
Via technology conferencing, etc. are major
With customers Databases allow for
With marketing partners customization of
products, messages and
With the world analysis of needs.
The Internet
Facilitates anytime,
anywhere connections
Facilitates CRM
Creates market spaces

Marketing Challenges
Connecting Partner relationship
management involves:
Via technology Connecting inside the
With customers company
Connecting with
With marketing outside partners
partners Supply chain
With the world management
Strategic alliances

Marketing Challenges
Connecting Globalization
Via technology Competition
New opportunities
With customers
Greater concern for
With marketing partners environmental and social
With the world responsibility
Increased marketing by
nonprofit and public-sector
Social marketing