Marketing: Creating and Capturing Customer Value

Chapter One
Marketing: Creating and

Capturing Customer Value
Chapter 1- slide 1
Creating and Capturing Customer

Value
Topic Outline
What Is Marketing?
Understand the Marketplace and Customer
Needs
Designing a Customer-Driven Marketing Strategy
Preparing an Integrated Marketing Plan and
Program
Building Customer Relationships
Capturing Value from Customers
The Changing Marketing Landscape (self
reading)
Copyright 2010 Pearson Education, Inc.
Publishing as Prentice Hall
Chapter 1- slide 2
What Is Marketing?
Marketing deals with customers its all
around you.
Old sense of marketing- making a sale
telling and selling.
New sense of marketing is satisfying
customer needs.
Marketing is a process by which
companies create value for customers
and build strong customer relationships
to capture value from customers in
return.
Chapter 1- slide 3
Marketing: is a total system of business activities

designed to plan, price, promote and distribute wantsatisfying products to target markets to achieve
organizational objectives.
This definition has two significant implications:
The entire system of business activities should be
customer oriented. Customer wants must be
recognized and satisfied.
Marketing should start with an idea about a want
satisfying product and should not end until the
customer wants are completely satisfied, which may
be sometime after the exchange is made.
Chapter 1- slide 4
Specify what we mean by product and

customer.
Product is used as a generic term to describe what
is being marketed whether it is a good, service,
idea, person or place.
The term consumer and customer often used
interchangeably.
Customer is the individual or organization that
actually makes the purchase decision.
Consumer is the individual or organizational unit
that uses or consumes a product.
Chapter 1- slide 5
THE MARKETING PROCESS

Chapter 1- slide 6
DIFFERENCES BETWEEN MARKETING

AND SELLING
Marketing is the process of determining

customer wants and then developing a
product to satisfy that need and also yield
a satisfactory profit. In this the company
adjusts its supply to the will of the
consumer demand.
It is externally
focused.
Selling is producing a product and then
trying to persuade customers to purchase
it -- in effect, trying to alter consumer
demand to fit the firms supply of the
product. It is internally focused.
Chapter 1- slide 7
Difference between selling and

marketing
In selling
In marketing
Emphasis is on the
product.
Company first makes
the product and then
figures out how to sell
it.
Management is sales
volume oriented.
Planning is short run
oriented, in terms of
todays products and
markets.
Emphasis is on customer
wants.
Company first determines
customers wants and then
figure out how to make and
deliver a product to satisfy
those wants.
Management is profit
oriented.
Planning
is
long
run
oriented in terms of new
products,
tomorrows
markets and future growth.

Chapter 1- slide 8
SELLING AND MARKETING CONCEPT

CONTRASTED
starting point
The
Selling
Concept
focus
means
ends
Factory
existing
products
selling
profits
& promoting through
sales volume
Market
customer
needs
integrated
marketing
The
Marketing
concept

profits
through
customer
satisfaction
Chapter 1- slide 9
Understanding the Marketplace

and Customer Needs
Core Concepts
Customer needs, wants, and

demands
Market offerings
Value and satisfaction
Exchanges and relationships
Markets
Chapter 1- slide 10

and Customer Needs
Customer Needs, Wants, and Demands

Chapter 1- slide 11

and Customer Needs
Market offerings are some combination of
products, services, information, or experiences
offered to a market to satisfy a need or want.
Not limited to physical products also includes
services for example banking, air travel, hotel stays.
Marketing myopia: the mistake of paying more
attention to the specific products a company offers
than to the benefits and experiences produced by
these products.
Is focusing only on existing wants and losing sight of
underlying consumer needs.
They forget that a product is only a tool to solve a
consumer problem.
For example manufacturer of quarter inch drill bit
thinks that customer needs drill bit but the
customer needs is a quarter inch hole.
Chapter 1- slide 12

and Customer Needs
Customer Value and Satisfaction
Expectations

Chapter 1- slide 13

and Customer Needs
Exchange is the act of obtaining a desired object from
someone by offering something in return.
Marketing can occur anytime one social unit (person or organization)
strives to exchange something of value with another social unit.
The essence of marketing is a transaction or exchange.
Marketing occurs when people decide to satisfy needs and wants
through exchange relationships.
Suppose you want some clothes. You can make them yourself, or you
can steal them or you can offer some thing of value to a person who
will exchange the clothes for what you offer.

Chapter 1- slide 14
Exchanges are carried out by business firms,

and also by non-business organizations and
even individuals.
Four conditions must exist for an exchange to
be able to occur:
1. Two or more people or organizations must be
involved.
2. The parties must be involved voluntarily.
3. Each party must have something of value to
exchange, and the parties must believe they
will each benefit from the exchange.
4. The parties must be able to communicate
with each other.

Chapter 1- slide 15

and Customer Needs
Markets are the set of actual and
potential buyers of a product.
These buyers share a particular
need or want that can be satisfied
through exchange relationships.

Chapter 1- slide 16
Designing a Customer-Driven
Marketing Strategy
Marketing management is the art
and science of choosing target
markets and building profitable
relationships with them
What customers will we serve?
How can we best serve these
customers?
Chapter 1- slide 17
Marketing Strategy
Selecting Customers to Serve
Market segmentation refers to dividing the markets into segments
of customers
Target marketing refers to which segments to go after
Market segmentation and target marketing are two steps of the
marketing process. Although the two go hand-in-hand, there are
distinct differences between them, as market segmentation must
take place before a target market is determined.
Market segmentation occurs when a company decides that they
want to identify a specific type of consumer to which they can
market their product or service. A target market is determined
once the company identifies which consumers to sell to.

Chapter 1- slide 18
Market segmentation is the process of dividing a

market into distinct subsets that behave in the
same way or have similar potential for your
product/service.
Segmenting
is
done
by
demographics (age, sex, income, race, etc.),
geographic (international, city, state, national,
climate, etc.), psychographics (personality,
lifestyle,
political
party,
etc.),
behavioral
characteristics
(consumption
status,
brand
loyalties, shopping habits, etc.) , and by sought
after benefits that can better the lives of your
segmented market with your product/service.
Through this process you are able to target
market to the specific segmented market fit for
your product/service
Chapter 1- slide 19
Marketing Strategy
Selecting Customers to Serve
Demarketing is marketing to reduce

demand temporarily or permanently; the
aim is not to destroy demand but to reduce
or shift it.
These marketers seek fewer customers and
reduced demands.
For example: amusement parks overcrowded
in summers, so trouble meeting demands,
then company practice demarketing, to
reduce number of customers.
Chapter 1- slide 20
Marketing Strategy
Choosing a Value Proposition
The value proposition is the set of
benefits or values a company promises

to deliver to customers to satisfy their
needs
For example nokia is connecting people,
where as Apple iphone is touching is
believing.
Chapter 1- slide 21
Marketing Strategy
Marketing Management Orientations

Chapter 1- slide 22
Marketing Strategy
Production concept is the idea that

consumers will favor products that are
available or highly affordable.
Management should focus on improving
production and distribution efficiency.
This concept is one of the oldest orientation
that guides sellers.
Company focus on their own operations and
not focusing on real objective.
Chapter 1- slide 23
Marketing Strategy
Product concept is the idea that consumers will

favor products that offer the most quality,
performance, and features. Organization should
therefore devote its energy to making continuous
product improvements.
Focus
is
on
making
continuous
product
improvements & product quality.

Chapter 1- slide 24
Marketing Strategy
Selling concept is the idea that consumers will not

buy enough of the firms products unless it
undertakes a large scale selling and promotion
effort.
Focus is on creating sales transactions rather than
on building
long term profitable customer
relationship.
The aim is to sell what the company makes rather
than making what the market wants.

Chapter 1- slide 25
Marketing Strategy
Marketing concept is the idea that achieving

organizational goals depends on knowing the needs and
wants of the target markets and delivering the desired
satisfactions better than competitors do.
Customer focus and value are the paths to sales and
profits.
The job is not to find the right customers for your product
but to find the right products for your customers.

Chapter 1- slide 26
Marketing Strategy
Societal marketing concept is the idea that a company

should make good marketing decisions by considering
consumers wants,
the
companys
requirements,
consumers long-term interests, and societys long-run
interests.
For example bottle water industry, offering a convenient,
tasty and healthy product but making, filling and shipping of
these bottles generate carbon dioxide that contribute to
global warming and solid waste disposal problems.
So satisfying short term consumer wants cause
environmental problems that run against societys long run
interests.
Chapter 1- slide 27
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
includes product, price, promotion, and place.
Integrated
marketing
program
is
a
comprehensive plan that communicates and
delivers the intended value to chosen customers.

Chapter 1- slide 28

Customer Relationship Management (CRM)
The overall process of building and

maintaining profitable customer
relationships by delivering superior
customer value and satisfaction.
It deals with the aspects of acquiring,
keeping and growing customers.

Chapter 1- slide 29

Relationship Building Blocks: Customer Value and Satisfaction

Chapter 1- slide 30
. Customer perceived value: For example, Do

Ammar Bilal black label dress shirts, really
provide superior quality and that sophisticated
look that make them worth the higher price? Its
all the matter of personal value perceptions.
Customer
satisfaction:
if
the
product
performance falls short of expectations, the
customer is dissatisfied.
If
performance
matches
expectation
the
customer is satisfied.
If performance exceeds expectations, the
customer is highly satisfied or delighted.

Chapter 1- slide 31

Customer Relationship Levels and Tools

Chapter 1- slide 32

The Changing Nature of Customer
Relationships
Relating with more carefully selected customers uses

selective relationship management to target fewer, more
profitable customers.
Once firm identify profitable customers firms can create
attractive offers to capture these customers and earn
their loyalty.
For example consumer electronics retailer best buy
recently rolled out a new customer centricity strategy
that distinguishes between its best customers called
angels and less profitable ones called demons. The aim
is to embrace the angels while ditching the demons.
Relating more deeply and interactively by incorporating
more interactive two way relationships through emails,
blogs, Websites, video sharing to online communities and
social networks such as face book and you tube.
Chapter 1- slide 33

Marketers cannot work alone, they must
work closely with variety of marketing
partners.
Partner relationship management
involves working closely with partners in
other company departments and outside
the company to jointly bring greater
value to customers

Chapter 1- slide 34

Partner Relationship Management
Partners inside the company is every function
area interacting with customers
Electronically
Cross-functional teams: rather than assigning
sales and marketing people to customers P&G
assigns customer development teams
consists of sales and marketing people,
operation specialists, market and financial
analyst and others coordinate the efforts of
P&G departments.
Partners outside the company is how marketers
connect with their suppliers, channel partners,
and competitors by developing partnerships
Chapter 1- slide 35

Partner Relationship Management
Marketing channels consist of distributors, retailers, and

other who connect the company to its buyers.
Supply chain is a channel that stretches from raw materials
to components to final products to final buyers.
For example supply chain for personal computers consists
of suppliers of computer chips and other components, the
computer manufacturer, the distributors, retailers and
others who sell the computers.
Supply chain management many companies today are
strengthening their connections with partners all along the
supply chain.
Success at building customer relationships also rests on
how well their entire supply chain performs against
competitors supply chains.
Chapter 1- slide 36

Creating Customer Loyalty and Retention
The final step involves capturing value in return in

form of current and future sales, market share, profits.
It creates highly satisfied customers who stay loyal,
who buy and continue to buy the company brands.
This creates greater long run return for the firms.
Good customer relationship management creates
customer delight.
Delighted customers remain loyal and talk favorably
to others about the company and its products.
Customer lifetime value is the value of the entire
stream of purchases that the customer would make
over
a
lifetime
of
patronage.
Chapter 1- slide 37

Growing Share of Customer
Share of customer is the portion of the

customers purchasing that a company gets in its
product categories.
To increase share of customers firms can offer
great variety to current customers.
For Amazon.com, online book seller, in order to
increase share of customer offers music, videos,
gifts, toys, consumer electronics, office products,
home improvements items, lawn and garden
products, apparel and accessories, jewelry, tools
and even groceries. This way it captures a greater
share of each customers spending budget.
Chapter 1- slide 38

Customer equity is the total combined
customer lifetime values of all of the
companys customers.
The only value your company will ever
create is the value that comes from
customers the ones you have now and
the ones you have in the future.
The more loyal the firms profitable
customers, the higher the firms customer
equity.
Chapter 1- slide 39

Building Customer Equity
Building the right relationships with

the right customers involves treating
customers as assets that need to be
managed and maximized
Different types of customers require
different relationship management
strategies
Build the right relationship with the
right customers
Chapter 1- slide 40
BUILDING THE RIGHT RELATIONSHIP WITH THE

RIGHT CUSTOMERS

Chapter 1- slide 41
The Changing Marketing

Landscape
Major Developments

Chapter 1- slide 42

Marketing: Creating and Capturing Customer Value

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Chapter One

Marketing: Creating and

Creating and Capturing Customer

Marketing: is a total system of business activities

Specify what we mean by product and

THE MARKETING PROCESS

Copyright 2010 Pearson Education, Inc.

DIFFERENCES BETWEEN MARKETING

Marketing is the process of determining

Difference between selling and

Copyright 2010 Pearson Education, Inc.

SELLING AND MARKETING CONCEPT

Copyright 2010 Pearson Education, Inc.

Understanding the Marketplace

Customer needs, wants, and

Understanding the Marketplace

Copyright 2010 Pearson Education, Inc.

Understanding the Marketplace

Understanding the Marketplace

Copyright 2010 Pearson Education, Inc.

Understanding the Marketplace

Copyright 2010 Pearson Education, Inc.

Exchanges are carried out by business firms,

Copyright 2010 Pearson Education, Inc.

Understanding the Marketplace

Copyright 2010 Pearson Education, Inc.

Copyright 2010 Pearson Education, Inc.

Market segmentation is the process of dividing a

Demarketing is marketing to reduce

The value proposition is the set of

benefits or values a company promises

Copyright 2010 Pearson Education, Inc.

Production concept is the idea that

Product concept is the idea that consumers will

Copyright 2010 Pearson Education, Inc.

Selling concept is the idea that consumers will not

Copyright 2010 Pearson Education, Inc.

Marketing concept is the idea that achieving

Copyright 2010 Pearson Education, Inc.

Societal marketing concept is the idea that a company

Preparing an Integrated Marketing

Copyright 2010 Pearson Education, Inc.

Building Customer Relationships

The overall process of building and

Copyright 2010 Pearson Education, Inc.

Building Customer Relationships

Copyright 2010 Pearson Education, Inc.

. Customer perceived value: For example, Do

Copyright 2010 Pearson Education, Inc.

Building Customer Relationships

Copyright 2010 Pearson Education, Inc.

Building Customer Relationships

Relating with more carefully selected customers uses

Building Customer Relationships

Copyright 2010 Pearson Education, Inc.

Building Customer Relationships

Building Customer Relationships

Marketing channels consist of distributors, retailers, and

Capturing Value from Customers

The final step involves capturing value in return in

Capturing Value from Customers

Share of customer is the portion of the

Capturing Value from Customers

Capturing Value from Customers