MKT1003A/1705A

How Does Marketing

Create Value?

A/P Doreen Kum

Semester 1 2019/20
 Defining Customer Value
Customer value is what customers receive from a product less
what they give in order to obtain it.
Value is an equation of benefit minus cost.
The actual cost of a product is often more than just the initial
price.

What are some benefits that consumers value

from Google? What about costs when it is free?
What about your wallet/purse?
Value
 Set of benefits a company promises to deliver to
customers to satisfy their needs
 Customer Value: the difference between the benefits
the customer gains from the product & the costs of
obtaining it
– Value = Benefits – Costs
– Benefits could be functional or psychological
– Costs could include more than money (e.g.,
effort, time)
 Customer Perceived Value
• Customers often do not judge values and costs “accurately” or
“objectively”. Customers act on perceived value.

• Need for differentiation

4 © 2012 Principles of Marketing: An Asian Perspective

The Four Ps of the Marketing Mix
These elements are known as the four Ps or the marketing mix.
These are tools that marketers use to carry out their strategy.
1. Product: creates value
2. Price: determines if it is worthwhile for an exchange,
signals value to customers, captures value for the company
3. Place: delivers value (right time, right place, right quantity)
4. Promotion: communicates to inform and persuade
consumers of the value (not necessary media, includes
words of mouth, packaging, shopfront – decorations etc.)
 1. Product
Product is a specific combination of goods, services, or ideas that
a firm offers to consumers.
Services are products, but they are intangible products.

Left: ©poylock19/Shutterstock; Right: ©Tyler Olson/Shutterstock

Product
 Product: anything that can be offered to a market to satisfy
needs and wants
Goods
Services
Events & Experiences
Persons
Places & Properties
Organizations
Information
Ideas

 Consumers view products as bundles of benefits

 They choose those that give them the best value
 Creating Value
When marketers successfully match products to consumers’ needs
and wants, consumers are more likely to purchase and use those
products—and that is where value is created.
Matching products with wants and needs may seem simple, but it
isn’t.
• More than 80 percent of new products fail

What do you think companies

must do to successfully create
products that customers find
value in?

©H.S. Photos/Alamy Stock Photo

Needs versus Wants
Needs are states of felt deprivation.
• Could be physical, social, or psychological needs.
• Marketers do not create needs; they are a basic part of our
human makeup.
A want is something that you would like to have to satisfy needs.
(means to satisfy needs)
• Wants are typically shaped by a customer’s personality,
culture, background, and previous experiences.

Should we focus on customer

needs or wants?
Marketing Myopia
• The mistake of paying more attention to the specific products
and features than to the benefits and experiences customers
want from these products.
• Avoid marketing myopia by focusing on product benefits and
customer needs. (Focus on needs)

“People don’t want to buy a quarter-inch drill. They want a

quarter-inch hole.” Theodore Levitt
 Market-Oriented Business Definitions

11 © 2012 Principles of Marketing: An Asian Perspective

 One step further: customer-driven vs customer
driving

12
 2. Price
Price is the amount of something—money, time, or effort—that
a buyer exchanges with a seller to obtain a product.
Marketers must determine the appropriate price that customers
are willing to pay in order to best capture value for that product
or service.
Price is the primary way that firms can capture value from
customers.

Shutterstock / Lee Prince

 3. Place
Place includes the activities a firm undertakes to make its
product physically available or easily accessible to customers.
Place includes location, distribution, inventory management, and
even where to put an item in a store.
Place is important because, even with the right product at the
right price, if customers can’t easily purchase the product, they
may likely find a substitute.

Photo: Erica Simone Leeds

 4. Promotion
Promotion refers to all the activities that communicate the value
of a product and persuade customers to buy it.
Successful promotion involves the firm’s ability to integrate its
promotional activities in a way that maximizes the value of each.
These are promotion mix elements: tools used for promotion
strategy
 Summary of How Marketing Creates Value

 Understanding target customers’ needs,

 Creating products and services that meet
existing and latent needs,
 Delivering the desired value better than
competitors do,
 To make profits through satisfaction and
loyalty (…more about this in Lesson 7)

16 © 2012 Principles of Marketing: An Asian Perspective