Week 1 – Marketing Principles

WHAT IS MARKETING?
What is marketing?
●What is marketing?

Marketing is a process by which companies create value for customers and build strong customer
relationships to capture value from customers in return (Kotler & Armstrong, 2012).

●Marketing process

The simple model of marketing process:

1. Understand the marketplace and customer needs

2. Design a customer-driven marketing strategy
3. Construct an integrated marketing program that delivers superior value
4. Build profitable relationships and create customer delight
5. Capture value from customers to create profits and customer equity

Stage 1: Understand the Marketplace and Customer Needs

●Customer needs, wants, and demands

Needs: Human needs are states of felt deprivation.

-Physical needs: Food, clothing, warmth, and safety

-Social needs: Belonging and affection

-Individual needs: Knowledge and self-expression

Wants: Wants are the form human needs take, as they are shaped by culture and individual personality.

Wants are described in terms of objects that will satisfy needs.

Demands: Human wants that are backed by buy power.

●Marketing offerings: Goods, services, and experiences

Consumers’ needs and wants are fulfilled through market offerings – some combination of products,
services, information, or experiences offered to a market to satisfy a need or want.

“Marketing Myopia”

-The mistake of paying more attention to the specific products a company offers than to the benefits
and experiences derived from these products.
-It is when the company is focusing only on existing wants and losing sight of underlying consumer
needs.

-Companies must seek to avoid the marketing myopia trap!

●Customer value and satisfaction

Customers form expectations about the value and satisfaction that various market offerings will deliver,
and buy accordingly.

Creating the balance between customer expectations and the marketers’ ability to deliver on value

●Exchanges, transactions, and markets

Exchange:

-The act of obtaining a desired object from someone by offering something in return.

-Marketing occurs when people decide to satisfy needs and wants through exchange relationships.

Transaction:

-A trade between two parties that involves at least two things of values, agreed-upon conditions, and a
time and place of agreement.

-A transaction is marketing’s unit of measurement.

Market:

-The set of all actual and potential buyers of a product or service.

-These buyers share a particular need or want that can be satisfied through exchange relationship.

Stage 2: Design a customer-driven marketing strategy

●Design a customer-driven marketing strategy

Two key questions to determine how to design a winning marketing strategy:

-What customer will we serve?

-How can we best serve these customers?

●Select customers to serve

Under limited resources and specific market circumstance, a firm cannot serve all types of customers.
Therefore, it should carefully select the right customers to serve at its best.

●Choose a value proposition

The company must also decide how it will serve targeted customers—how it will “differentiate” and
“position” itself in the marketplace. A brand’s value proposition is the set of benefits or values it
promises to deliver to consumers to satisfy their needs (Kotler & Armstrong, 2012).

●Marketing Management orientations

There are 5 alternative concepts:

1.Production Concept

-Consumers will favour products that are available and affordable.

-Management should focus on improving production and distribution efficiency.

2.Product Concept

-Consumers will favour products that offer the most in quality, performance, and innovative features

-Organization should therefore devote its energy to making continuous product improvements.

3.Selling Concept

Consumers will not buy enough products unless:

-The company undertakes a large scale selling and

-Promotion effort from the company

4.Marketing Concept

-Customer-driven marketing is about understanding customer needs and creating products and services
that meet existing and latent needs.

-And delivering the desired satisfactions better than competitors do

5. Societal Marketing Concept

Societal marketing concept is the idea that a company should make good marketing decisions by:

-Considering consumers’ wants

-The company’s requirements

-Consumers’ long-term interests and society’s long-run interests.

Companies should balance three considerations in setting their marketing strategies: company profits,
consumer wants, and society’s interests.

Selling vs Marketing Concept:

Starting point Focus Means Ends

Selling Factory Existing Products Selling and Profits through sales
Concept Promoting volume
Marketing Market Customer needs Integrated Profits through
Concept Marketing customer satisfaction

> There is no right or wrong Marketing Concept.

Firms will choose to apply the Marketing concept that is suitable with their products, their
industry and their competences.

Stage 3: Preparing an Integrated Marketing Plan and Program

The major marketing mix tools are classified into four broad groups, called the four Ps of marketing:
Product, Price, Place, and Promotion.

-To deliver on its value proposition, the firm must first create a need-satisfying market offering
(product).

-It must decide how much it will charge for the offering (price) and,

-How it will make the offering available to target consumers (place)

-Finally, it must communicate with target customers about the offering and persuade them of its merits
(promotion).

Stage 4: Building Customer Relationship

●Building customer relationships

The overall process of building and maintaining profitable customer relationships by delivering superior
customer value and satisfaction. This is actually a continuous and ongoing process since Stage 1.
Marketers do not wait until “Stage 4” to develop customer relationships.

Managing customer “touch points” in order to maximize customer loyalty.

Customer perceived value: The difference between total customer value and customer cost

Customer satisfaction: The extent to which a product’s perceived performance matches a buyer’s
expectations
If:

-Buyer’s expectation > Offer’s perceived performance/ Customer perceived value -> Unsatisfied

-Buyer’s expectation = Offer’s perceived performance/ Customer perceived value -> Satisfied

-Buyer’s expectation < Offer’s perceived performance/ Customer perceived value -> Highly satisfied/
Delighted

Stage 5: Capturing Value from customers

●Creating customer loyalty and retention

Customer lifetime value is the value of the entire stream of purchases that the customer would make
over a lifetime of patronage.

●Capturing value from customers

Customer equity is the total combined customer lifetime values of all of the company’s customers

The more loyal firm’s profitable customers, the higher the firm’s customer equity!