CH 01 Creating and Capturing Customer Value PDF

1/1/2015
Discussion Questions
i t ’s good and
1. Why is marketing important?
good for you
2. What is the scope of marketing?
3. What are some fundamental
Chapter 1 marketing concepts?
4. How has marketing management
Marketing: changed in recent years?
Creating and Capturing Customer Value
5. What are the task necessary for
successful marketing management?
Copyright © 2014 Pearson Education, Inc. Publishing as Prentice Hall 1-2
Good Marketing is No Accident What is Marketing?
Marketing deals with customers and is

Boston Beer Good more than any other business function
Company, marketing
is a result Marketing is not confined to:
maker of
Samuel of careful • Advertising and selling
Adams, planning • Telling and selling
constantly and
• Fishing and hunting
innovates execution
These are like the tips of iceberg!!!
Copyright © 2014 Pearson Education, Inc. Publishing as Prentice Hall 1-3 Copyright © 2014 Pearson Education, Inc. Publishing as Prentice Hall 1-4
NOT FOR EXAMINATION
Selling Is Only the Tip of the Iceberg

What is Marketing?
“The aim of marketing is to make selling unnecessarily.”
“There will always be need for Briefly, marketing can be defined as:
some selling. But the aim of marketing
is to make selling superfluous. The aim • Sensing and responding
of marketing is to know and understand • Identifying and meeting human and social
the customer so well that the product or needs more profitably
service fits him and sells itself. Ideally,
marketing should result in a customer • Managing profitable customer relationships
who is ready to buy. All that should be
needed is to make the product or Marketing is like gardening!!!
service available.”
Peter Drucker
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What Is Marketing? What is Marketed?
Marketing is a process by which companies • Goods • Places

create value for customers and build • Services • Properties
strong customer relationships to
• Events • Organizations
capture value from customers
in return. • Experiences • Information Place
Marketing is an organizational function and a set of processes for

• Persons • Ideas
creating, communicating, and delivering value to customers
and for managing customer relationships in
ways that benefit the organization
and its stakeholders.
Persons
Services Goods
NOT FOR EXAMINATION
Marketing Ideas Who markets?
“Friends Don‟t Let Response

Friends Drive Drunk. ”
Attention
This is the watch Purchase
Stephen
Donation
Hollingshead, Jr. was
wearing when he Vote
encountered a drunk
driver.
Marketer Prospect
Time of death 6:55 p.m.

Understanding the Marketplace

The Marketing Process and Customer Needs and Wants
Marketplace, Marketspace, and Metamarket
Marketplace: Physical Marketspace: Digital

locations—retail store locations—online retailer
Fig: A Simple Model of the Marketing Process
Metamarkets: The cluster of complementary products and services

related in consumers mind, but spread across diverse set of industries.
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NOT FOR EXAMINATION
Understanding the Marketplace Understanding the Marketplace

and Customer Needs and Customer Needs
Needs, Wants, and Demands
Types of Needs
• The states of felt deprivation or the basic
human requirements Stated I want an inexpensive car
Needs • Physical—food, clothing, warmth, safety
• Social—belonging and affection
• Individual—knowledge and self-expression
Real I want a car with lower operating cost

• Needs become wants when they are
directed to specific objects that can
Wants satisfy the need
Unstated I expect good service from the dealer
• Shaped by culture and individual personality
I would like the dealer to include an

Delight onboard GPS navigation system.
Demands • Demands are wants backed by buying
power I want my friends to see me as a
Secret savvy consumer

and Customer Needs Understanding the Marketplace
Market Offerings an d Marketing Myopia and Customer Needs
Customer Value and Satisfaction
Market offerings are some combination of
Why do marketers not always understand customer needs?
products, services, information, or
experiences offered to a market to satisfy a Customers’
need or want Value and
Marketing myopia is the mistake of satisfaction
focusing only on specific products marketers
Customers
offer, and losing sight of underlying
• Form expectations Marketers • The key building
consumer needs and the benefits and about the value and blocks for developing
• Set the right level of
experiences produced by these products satisfaction that expectations and managing
market offerings will • Not too high or low customer relationships
deliver and buy
accordingly
NOT FOR EXAMINATION

and Customer Needs Understanding the Marketplace
Means of Getting Products and Customer Needs
Self Production Begging Exchange
Exchange is the act of obtaining a desired object

from someone by offering something in return
» A value creating process because both parties get
benefit out of it
» There are some conditions for an exchange
Coercion Exchange
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Market Markets
A market is NOT
» A physical place where buyers and sellers
gathered to buy and sell goods
» A collection of buyers and sellers who transact
over a particular product or product class
A market is a set of all present and potential

buyers sharing a particular need or want, and
willing and able to engage in exchange

Key Customer Markets
A Modern Marketing System
Consumer Market Business Markets
Global Markets Government Market

Designing a Customer-Driven Designing a Customer-Driven Marketing

Marketing Strategy Strategy
Marketing Management
Marketing Management
Marketing management is the art and science Negative Nonexistent Latent

of choosing target markets and getting, keeping
and growing customers through creating,
delivering, and communicating superior
customer value. Declining Irregular
• What customers will we serve?

• How can we best serve these customers?
Full Overfull Unwholesome
Copyright © 2014 Pearson Education, Inc. Publishing as Prentice Hall 1-23
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Designing a Customer-Driven Marketing Designing a Customer-Driven Marketing

Strategy Strategy
Marketing Management Marketing Management
• Negative (dislike product and • Why do they dislike? Can • Irregular (purchases vary on a • Adopt synchro-marketing by
may even pay a price to marketing program change seasonal, monthly, weekly, daily, changing price, product
avoid it) their beliefs and attitudes? or even hourly basis) features, marketing
communication etc
• Nonexistent (unaware of or • Connect the benefits of the • Unwholesome (product that • Get people to give these
product with the person's have undesirable social
not interested in the product) products up.
natural needs and interests. consequences)
• Latent (need that cannot be • Measure the size of the • Full (adequately buying all • Maintain and monitor
satisfied by existing product) potential market & develop products put into the current demand level.
effective goods and services marketplace)
• Overfull (more consumers • De-marketing, not to destroy
• Declining (buy the product • Re-stimulate demand by
would like to buy the product but only to reduce its level,
less frequently or not at all) changing marketing programs that can be satisfied) temporarily or permanently
through creative remarking
Designing a Customer-Driven Designing a Customer-Driven

Marketing Strategy Marketing Strategy
Selecting Customers to Serve Selecting Customers to Serve
Segmentation is dividing a market into distinct Target marketing refers to which segments
groups of buyers who have different needs,
to go after
characteristics, or behaviors, and who might
require separate products or marketing programs Positioning is the act of designing a
company‟s offering and image to occupy a
Target market is the segment of market which
distinctive place in the minds of the target
presents the greatest opportunities and the
market
marketer decides to pursue

Choosing a Value Proposition Marketing Management Orientations
• Marketing management designs strategies to

Value proposition is
build profitable relationships with target
the set of benefits or
consumers
values a company
» What philosophy should guide these marketing
promises to deliver to strategies?
customers to satisfy
» What relative weights should be given to the interests of
their needs the customers, the company, and society?
» How to reconcile these conflicting interests?
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Marketing Management Orientations
Production concept is the idea that consumers

Quality Create, deliver, and
Innovation communicate value will favor products that are available or highly
affordable
Production Product Selling Marketing Holistic
Mass » Mass production, distribution and low cost
Unsought Cohesive
production approach: » Makes sense in developing countries
goods
Mass Everything matters
Overcapacity
distribution

Product concept is the idea that consumers will Shortcomings

favor products that offer the most quality,
» Focusing only on company‟s products can lead to „marketing
performance, and features.
myopia‟
» Assumes consumers like quality products and they » Managers are caught in a love affair with their products and
can apprise those products commit the ”better-mousetrap” fallacy
» Firms should continuously devote its energy to » „Look into a mirror instead of looking out of the window‟
making product improvement » Ignoring price, distribution, and communications

Selling concept is the idea that consumers will

not buy enough of the firm‟s products unless it • Suitable for unsought goods
undertakes a large scale selling and promotion • Firms with overcapacity aim to sell what they make,
effort rather than make what the market wants
» Assumes that buyers can be coaxed into buying • Focuses on the needs of sellers, not the needs of
and firms have a whole battery of promotional tools buyers
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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
» A customer-centric approach emerged in
the mid-1950s
» Make the right products for your
customers, not to find the right
customers for your products
Figure: Contrasts Between the Sales Concept and the Marketing Concept

Holistic marketing acknowledges that everything

matters in marketing and that a broad, integrated
perspective is often necessary
» A cohesive approach considers business as a whole
» Based on development, design, and implementation
of marketing programs, processes, activities that
recognizes their breadth and interdependencies
NOT FOR EXAMINATION NOT FOR EXAMINATION
The Ten Deadly Sins of Marketing The Ten Commandments of Marketing

1. The company segments the market, chooses the best segments, and develops a
1. The company is not sufficiently market focused and customer strong position in each chosen segment.
driven. 2. The company maps its customers‟ needs, perceptions, preferences, and behavior
2. The company does not fully understand its target customers. and motivates its stakeholders to obsess about serving and satisfying the customers.
3. The company knows its major competitors and their strengths and weaknesses.
3. The company needs to better define and monitor its competitors.
4. The company builds partners out of its stakeholders and generously rewards them.
4. The company has not properly managed its relationships with its
5. The company develops systems for identifying opportunities, ranking them, and
stakeholders.
choosing the best ones.
5. The company is not good at finding new opportunities. 6. The company manages a marketing planning system that leads to insightful long-
6. The company‟s marketing plans and planning process are deficient. term and short-term plans.
7. The company‟s product and service policies need tightening. 7. The company exercises strong control over its product and service mix.
8. The company‟s brand-building and communications skills are weak. 8. The company builds strong brands by using the most cost-effective
9. The company is not well organized to carry on effective and communication and promotion tools.
efficient marketing. 9. The company builds marketing leadership and a team spirit among its various
departments.
10. The company has not made maximum use of technology.
10. The company constantly adds technology that gives it a competitive advantage in
the marketplace.
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Relationship marketing
Internal marketing is the task of hiring, training,
and motivating able employees for different
departments and top management who want to
serve customers well
Integrated marketing
» “The whole is greater than the sum of its parts”
» Recognize that many different marketing activities can
create, communicate, and deliver value Build mutually satisfying, long-term
relationships with key constituents
» Designs and implements any one marketing activity with
Develop marketing networks
all other activities in mind
Designing a Customer-Driven
Marketing Strategy Preparing an Integrated Marketing
Marketing Management Orientations Plan and Program
Performance marketing considers financial and
nonfinancial returns to business and society from The marketing mix is the set of tools or four Ps
marketing activities.
the firm uses to implement its marketing strategy.
» Financial scorecard vs. Marketing scorecard
» Consider the legal, ethical, social, and environmental Integrated marketing program is a
effects of marketing activities and programs comprehensive plan that communicates and
delivers the intended value to chosen customers.
Social Responsibility
Financial Accountability
Preparing an Integrated Marketing Preparing an Integrated Marketing

Plan and Program Plan and Program
• McCarthy Marketing Modern • People are employees.

classified Mix Marketing • Processes are all creativity,
various 4 Ps 4 Ps discipline, and structure brought to
marketing marketing management.
activities into Product People
• Programs are firm‟s consumer-
marketing-mix
directed activities.
tools of four Place Processes
broad kinds, • Performance is the possible
called 4 Ps. outcome measures that have
Promotion Programs financial and nonfinancial
• The marketing implications and implications beyond
variables under the company itself.
Price Performance
each P are
shown in Figure The New Four Ps
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Preparing an Integrated Marketing Building Customer Relationships

Plan and Program
Customer Relationship Management (CRM)
• The overall process of

building and maintaining
profitable customer
relationships by delivering
superior customer value
and satisfaction
» Build and maintain the right
type of relationship with the
right types of customers
Building Customer Relationships

Relationship Building Blocks: Customer Value Building Customer Relationships
and Satisfaction Customer Relationship Levels and Tools
Customer-
Customer- Customer
value satisfaction
Basic
• The difference • The extent to Relationships
between the which a
» Primarily a » If P<E=Dissatisfied
function of total perceived product‟s
QSP, called tangible and perceived » If P> E=Delighted
customer intangible performance » If P= E=Satisfied
value triad
matches a
Full
customer
benefits and buyer‟s Partnerships
total customer expectations
cost
Building Customer Relationships Building Customer Relationships

The Changing Nature of Customer
The Changing Nature of Customer
Relationships
Relationships
• Focus on carefully selected customers • Customer-managed relationships

» Customers interact with companies and with each
• Make relationships deep and interactive other to shape their relationships with brands
» Consumer-managed relationships
• Consumer-generated marketing
» Consumer-generated marketing » Consumers themselves play a bigger role in shaping
their brand experiences (invited and uninvited) and
those of others
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Building Customer Relationships Building Customer Relationships

Partner Relationship Management Partner Relationship Management
• Partner relationship management involves • Supply chain is a channel that stretches from
raw materials to components to final products to
working closely with partners in other departments
final buyers
of company and outside the company to jointly
bring greater value to customers » Through supply chain management companies
strengthen their connections with partners all
» Partnering inside the company along the supply chain
» Partnering outside the company
Capturing Value from Customers Capturing Value from Customers

Creating Customer Loyalty and Retention Growing Share of Customer
Customer lifetime value is the value of the

entire stream of purchases that the customer Share of customer is the portion of the
would customer‟s purchasing that a company gets
make over a in its product categories
lifetime of
patronage
NOT FOR EXAMINATION
Marketing in Theory and

Capturing Value from Customers Practice
Building Customer Equity
• In theory, marketing planning process consists of
Customer equity is the total combined analyzing marketing opportunities, selecting target
customer lifetime values of all of the company‟s markets, designing marketing strategies, developing
customers marketing programs, and managing the marketing
effort.
» Build right relationships with right customers, treat them
as assets, and mange the relationships and maximize • In practice, marketing planning is not confined to the
the number of customers norm; it is more fluid and is continually refreshed.
» Different types of customers require different relationship » Companies must move forward with marketing programs,
management strategies innovate offerings, stay in touch with customer needs,
and seek new advantages rather than rely on past
strengths.
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CMOs’ Success Factors The New CMOs’ Qualities
• Must have strong quantitative and qualitative skills, Innate Qualities Learned Qualities
independent, entrepreneurial attitude • Risk taker • Global experience
• Must work in close harmony with other departments • Willingness to make • Multichannel expertise
decisions
• Must capture the “voice” and point of view of • Cross-industry
consumers • Problem-solving ability experience
• Understand how marketing creates value within their • Change agent • Digital focus
organization • Results-oriented • Operational knowledge
Who Is Responsible for Marketing?

Marketing Management Tasks
Entire Organization
Marketing Department • Develop market strategies and plans
• Capture marketing insights
• Connect with customers
Chief Marketing Officer
(CMO) • Build strong brands
• Shape market offerings
• Marketers think in
• Deliver value
other departments
as executives and
• Communicate value
executives in other • Create long-term growth
departments think
more like marketers
Shifts in Marketing Management Shifts in Marketing Management
• From marketing does the marketing to everybody • From emphasizing tangible assets to emphasizing
does the marketing intangible assets
• From organizing by product units to organizing by • From building brands through advertising to
customer segments building brands through performance and
• From making everything to buying more goods integrated communications
and services from outside • From attracting customers through stores and
• From using many suppliers to working with fewer salespeople to making products available online
suppliers in a partnership • From selling to everyone to trying to be the best
• From relying on old market positions to firm serving well defined target markets
uncovering new ones
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Shifts in Marketing Management The Changing Marketing Landscape
• New consumer frugality

• From focusing on profitable transactions to
focusing on customer lifetime value • More focus on value for the customer
• From a focus on gaining market share to a focus • Rapid Globalization

on building customer share • Sustainable Marketing
• From being local to being GLOCAL • Not-for-Profit Marketing
• From focusing on the financial scorecard to • More connectivity via information
focusing on the marketing scorecard • New tools to communicate with customers
• From focusing on shareholders to focusing on • Opportunity for online marketing
stakeholders
So, What Is Marketing?

Pulling It All Together Marketing Debate
1. Does Marketing Create or Satisfy Needs?
2. “The aim of marketing is to make selling

unnecessarily.”-- Peter Drucker
3. Why do marketer‟s not always understand

customer needs? How can they better identify
customer needs?
12

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Copyright © 2014 Pearson Education, Inc. Publishing as Prentice Hall 1-2

Good Marketing is No Accident What is Marketing?

Marketing deals with customers and is

NOT FOR EXAMINATION

Selling Is Only the Tip of the Iceberg

What Is Marketing? What is Marketed?

Marketing is a process by which companies • Goods • Places

Marketing is an organizational function and a set of processes for

NOT FOR EXAMINATION

Marketing Ideas Who markets?

“Friends Don‟t Let Response

Time of death 6:55 p.m.

Understanding the Marketplace

Marketplace: Physical Marketspace: Digital

Fig: A Simple Model of the Marketing Process

Metamarkets: The cluster of complementary products and services

NOT FOR EXAMINATION

Understanding the Marketplace Understanding the Marketplace

Real I want a car with lower operating cost

I would like the dealer to include an

Understanding the Marketplace

NOT FOR EXAMINATION

Understanding the Marketplace

Exchange is the act of obtaining a desired object

Understanding the Marketplace Understanding the Marketplace

A market is a set of all present and potential

Understanding the Marketplace Understanding the Marketplace

Consumer Market Business Markets

Global Markets Government Market

Designing a Customer-Driven Designing a Customer-Driven Marketing

Marketing management is the art and science Negative Nonexistent Latent

• What customers will we serve?

Copyright © 2014 Pearson Education, Inc. Publishing as Prentice Hall 1-23

Designing a Customer-Driven Marketing Designing a Customer-Driven Marketing

Designing a Customer-Driven Designing a Customer-Driven

Designing a Customer-Driven Designing a Customer-Driven

• Marketing management designs strategies to

Designing a Customer-Driven Designing a Customer-Driven

Production concept is the idea that consumers

Designing a Customer-Driven Designing a Customer-Driven

Product concept is the idea that consumers will Shortcomings

Designing a Customer-Driven Designing a Customer-Driven

Selling concept is the idea that consumers will

Designing a Customer-Driven Designing a Customer-Driven

Marketing concept is the idea that

Designing a Customer-Driven Designing a Customer-Driven

Holistic marketing acknowledges that everything

NOT FOR EXAMINATION NOT FOR EXAMINATION

The Ten Deadly Sins of Marketing The Ten Commandments of Marketing

Designing a Customer-Driven Designing a Customer-Driven

Preparing an Integrated Marketing Preparing an Integrated Marketing

• McCarthy Marketing Modern • People are employees.

Preparing an Integrated Marketing Building Customer Relationships

• The overall process of

Building Customer Relationships

Building Customer Relationships Building Customer Relationships

• Focus on carefully selected customers • Customer-managed relationships

Building Customer Relationships Building Customer Relationships

Capturing Value from Customers Capturing Value from Customers

Customer lifetime value is the value of the

NOT FOR EXAMINATION

Marketing in Theory and