Priciples of Marketing

by Philip Kotler and Gary Armstrong

Chapter 1
Marketing:Creating and Capturing
Customer Value
PEARSON

Objective Outline
What Is Marketing
1

Define marketing and outline the steps in the

marketing process.

Understanding the Marketplace and Customer

Needs
2

Explain the importance of understanding customers

and the marketplace and identify the five core
marketplace concepts.

Objective Outline

Designing a Customer-Driven Marketing

Strategy
Preparing an Integrated Marketing Plan and
Program
Identify the key elements of a customer-driven marketing
strategy and discuss the marketing management
orientations that guide marketing strategy.

Objective Outline

Building Customer Relationships

Capturing Value from Customers
Discuss customer relationship management and
identify strategies for creating value for customers
and capturing value from customers in return.

The Changing Marketing Landscape

5

Describe the major trends and forces that are

changing the marketing landscape in this age of
relationships.

What Is Marketing?
Simplest
definition

Marketing is
managing profitable
customer
relationships.

Attract new
customers by
promising superior
value

Keep and grow

current customers
by delivering
satisfaction.

Marketing Defined
Broadly defined, marketing is a social and managerial
process by which individuals and organizations obtain
what they need and want through creating and
exchanging value with others.

We define marketing as a process by which companies

create value for customers and build strong customer
relationships to capture value from customers in return.

Marketing Process
This important figure shows marketing in a nutshell. By
creating value for customers, marketers capture value from
customers in return. This five-step process forms the
marketing frame work for the rest of the chapter and the
remainder of the text.

Understand
Understand the
the
marketplace
marketplace and
and
customer
customer needs
needs
and
and wants
wants

Design
Design
customer-driven
customer-driven
marketing
marketing
strategy
strategy

Construct
Construct an
an
integrated
integrated
marketing
marketing
program
program that
that
delivers
delivers
superior
superior value
value

Create value for customers and

build customer relationships

Build
Build profitable
profitable
relationships
relationships
and
and create
create
customer
customer
delight
delight

Capture
Capture value
value
from
from
customers
customers to
to
create
create profits
profits
and
and customer
customer
equity
equity

Capture value from

customers in return

Understanding the Marketplace

and Customer Needs
Customer Needs, Wants, and Demands

Understanding the Marketplace

and Customer Needs
Customer Needs, Wants, and Demands

Market Offerings-Products, Wants,

and Demands
Market offerings are some combination of prod
ucts, services, information, or experiences offere
d to a market to satisfy a need or a want.

Marketing myopia is focusing only on existing

wants and losing sight of underlying consumer ne
eds.

Customer Value and Satisfaction

Expectations
Customers
From expectations about the value and satisfaction that v
arious market offerings
Will deliver and buy accordingly.

Marketers
Set the right level of expectations
Not too high or low

Exchanges and Relationships

Exchange
the act of obtaining a desired object from someone by of
fering something in return

Relationship
Marketing actions try to create, maintain, grow exchang
e relationships.

Markets
Each party in the system adds value. Walmart cannot fulfill
its promise of low prices unless its suppliers provide low
Markets
are
the
set
of
actual
and
potential
buyer
costs. Ford cannot deliver a high-quality car-ownership
s of aexperience
product.
unless its dealers provide outstanding service.
Arrows represent relationships that must be developed and
managed to create customers value and profitable customer
relationships.

Designing a Customer-Driven Market

ing Strategy
We define marketing management is the art and
science of choosing target markets and building p
rofitable relationships with them.
Two important questions:
What customers will we serve
(whats our target market)?

Ch2

How can we serve these

customers best (whats our
value proposition)?

Ch7

Selecting Customers to Serve

Market segmentation refers to dividing the marke
ts into segments of customers.
Target marketing refers to which segments to go
after.

Choosing a Value Proposition

A brands value proposition is the set of benefits
or values it promises to deliver to consumers to s
atisfy their needs.

Marketing Management Orientatio

ns

The
Product
Concept
The Societal Marketing Concept
The
Selling
Concept
The
Marketing
Concept
The
Production
Concept
The product
concept
holds that
consumers will

The societal marketing concept holds that

selling
concept
holds
that
consumers
willthe
not
The
concept
depends
on
knowing
production
concept
holds
that
consumers
will
favormarketing
products
that
offer
the
most
quality,
marketing strategy should deliver value to customers
buy
enough
ofand
the
firms
products
itdelivering
needs
and wants
offeatures.
the available
target
markets
and
favor
products
that
are
and
highly
performance,
Focus
isunless
on
continuous
in a way that maintains or improves both the
undertakes
asatisfactions
large scale selling
and competitors
promotion effort
the
desired
better than
do.
affordable.
product
improvements.
consumers and societys well-being.

Marketing Management Orientatio

ns
The selling concept takes an inside-out view that focuses on
existing products and heavy selling. The aim is to sell what the
company makes rather than making what the customer wants.
The marketing concept takes an outside-in view that focuses on
satisfying customer needs as a path to profits. As South-west
Airlines colorful founder puts it, We dont have a marketing
department, we have a customer department.

Preparing an Integrated
Marketing Plan and Program
The marketing mix is the set of tools (four Ps) the
firm uses to implement its marketing strategy. It i
ncludes product, price, promotion, and place.
Price
ct
Produ

t io n
o
m
o
r
P

The firm must blend each marketing mix tool int

o a comprehensive integrated marketing program
Place
that communicates and delivers
the intended valu
e to chosen customers.

Building Customer Relationships

Customer Relationship Management (CRM)
In this broader sense, customer relationship ma
nagement is the overall process of building and
maintaining profitable customer relationships by
delivering superior customer value and satisfactio
n.

Relationship Building Blocks:

Customer Value and Satisfaction
A customer buys from the firm that offers the hig
hest customer-perceived valuethe customers
evaluation of the difference between all the benef
its and all the costs of a market offering relative t
o those of competing offers.
Customer satisfaction depends on the products
perceived performance relative to a buyers expec
tations. If the products performance falls short of
expectations, the customer is dissatisfied.

Customer Relationship Levels and

Tools
Companies can build customer relationships at m
any levels, depending on the nature of the target
market.
Many companies offer frequency marketing prog
rams that reward customers who buy frequently o
r in large amounts.
Other companies sponsor club marketing progra
ms that offer members special benefits and create
member communities.

The Changing Nature of Customer

Relationships
Todays companies are building deeper, more dir
ect, and lasting relationships with more carefully
selected customers.

Relating with More Carefully Select

ed Customers
Today, most marketers realize that they dont wa
nt relationships with every customers. Instead, th
ey target fewer, more profitable customers.

Relating More Deeply and Interacti

vely
Relating more deeply and interactively by incorporating
more interactive two way relationships through blogs, We
bsites, online communities and social networks
Todays consumers have more information about brands t
han ever before, and they have a wealth of platforms for a
iring and sharing their brand views with other consumers.
Thus, the marketing world is now embracing not only cus
tomer relationship management, but also customer-mana
ged relationships.
A growing part of the new customer dialogue is consume
r-generated marketing, by which consumers themselves
are playing a bigger role in shaping their own brand exper
iences and those of others.

Partner relationship management

In addition to being good at customer relationshi
p management, marketers must also be good at p
artner relationship managementworking clo
sely with others inside and outside the company t
o jointly bring more value to customers.

Partner relationship management

In todays more connected world, every functiona
l area in the organization can interact with custo
mers. The new thinking is thatno matter what y
our job is in a companyyou must understand m
arketing and be customer focused.

Partner relationship management

The supply chain describes a longer channel, stre
tching from raw materials to components to final
products that are carried to final buyers.
Through supply chain management, companies t
oday are strengthening their connections with par
tners all along the supply chain.

Capturing Value from Customers

The final step involves capturing value in return i
n the form of sales, market share, and profits. By
creating superior customer value, the firm creates
highly satisfied customers who stay loyal and bu
y more. This, in return, means greater long-run re
turns for the firm.

Creating Customer Loyalty and Ret

ention
Customer lifetime value is the value of the entir
e stream of purchases that the customer would m
ake over a lifetime of patronage

Growing Share of Customer

Beyond simply retaining good customers to capture
customer lifetime value, good customer relationship
management can help marketers increase their shar
e of customerthe share they get of the customer
s purchasing in their product categories.

Building Customer Equity

Customer equity is the total combined customer
lifetime values of all of the companys current an
d potential customers.

Building the Right Relationships wi

th the Right Customers
Right relationships with the right customers invol
ves treating customers as assets that need to be m
anaged and maximized.
Different types of customers require different rela
tionship management strategies.

The Changing Marketing Landscape

This section have five major developments:
The Changing
Marketing
Landscape

The Digital Age

The Growth of Notfor-Profit Marketing

Rapid Globalization

Sustainable Marketing
The Call for More
Social Responsibility

The Changing Economic Environment

The Great Recession caused many consumers to rethink t
heir spending priorities and cut back on their buying.
In adjusting to the new economy, companies and slash pri
ces in an effort to coax more frugal customers into openin
g their wallets.
The challenge is to balance the brands value proposition
with the current times while also enhancing its long-term
equity.

The Digital Age

The digital age has provided marketers with exciting new
ways to learn about and track customers and create produ
cts and services tailored to individual customer needs.
Online marketing is now the fastest-growing form of mar
keting.

The Growth of Not-for-profit Marketing

In recent years, marketing has also become a major part o
f the strategies of many not-for-profit organizations, such
as colleges, hospitals, museums, zoos, symphony orchestr
as, and even churches.
Government agencies have also shown an increased inter
est in marketing.

Rapid Globalization
Today, almost every company, large or small, is touched i
n some way by global competition.
Managers in countries around the world are increasingly t
aking a global, not just local, view of the companys indu
stry, competitors, and opportunities.

Sustainable Marketing The Call for Mo

re Social Responsibility
As the worldwide consumerism and environmentalism m
ovements mature, todays marketers are being called on t
o develop sustainable marketing practices.
Corporate ethics and social responsibility have become h
ot topics for almost every business.

So, What Is Marketing? Pulling It All Tog

ether

The End