CHAPTER 1 | Marketing: Creating and Capturing Customer Value

What Is Marketing?
Marketing defined: the process by which companies create
value for customers and build strong customer relationships in
order to capture value from customers in return

Marketing process:

1. Understand marketplace and customers’ needs and wants

2. Design customer value driving marketing strategy

3. Construct integrated marketing program that delivers superior value

4. Build profitable relationship and create customer delight

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

Understanding the Marketplace and Customer Needs

Customer needs, wants and demands:

Needs are states of felt deprivation. They include: physical, social and
individual. Marketers did not create these needs; they are a basic part of
the human makeup.

Wants are the form human needs take as they are shaped by culture and individual
personality. An American needs food but wants a Big Mac.

=> When backed by buying power, wants become demands

Market offerings—some combination of products, services, information, or

experiences offered to a market to satisfy a need or a want. Market offerings are not
limited to physical products. They also include services—activities or benefits offered
for sale that are essentially intangible and do not result in the ownership of anything.

Marketing myopia occurs when a company becomes focused on their own

products that they lose sight of underlying customers needs

Exchanges and relationships

Exchange the act of obtaining a desired object from someone by offering

something in return. In the broadest sense, the marketer tries to bring
about a response to some market offering.

Marketing consists of actions taken to create, maintain, and grow

desirable exchange relationships
Markets

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

buyers share a particular need or want that can be satisfied through
exchange relationships.

Designing a Customer Value–Driven Marketing Strategy and Plan

Marketing management

The art and science of choosing target markets and building profitable
relationships with them

Selecting Customers to Serve

Market segmentation: dividing the market into segments of customers

Target marketing: selecting, choosing which segments it will go after.

Marketing Management Orientations

There are five alternative concepts under which organizations design and
carry out their marketing strategies:

The Production Concept

Consumers will favor products that are available and highly affordable

=>Management should focus on improving production and distribution

efficiency. Although useful in some situations, the production concept can
lead to marketing myopia

=> Too focused on the company that forgets the goal of satisfying
customer needs

The Product Concept

Consumers will favor products that offer the most in quality, performance,
and innovative features.

=>Marketing strategy focuses on making continuous product

improvements

=> However, focusing only on the company’s products can also lead to
marketing myopia

The Selling Concept

Consumers will not buy enough of the firm’s products unless it undertakes
a large-scale selling and promotion effort.
The Selling Concept is typically practiced with unsought goods—those that
buyers do not normally think of buying, such as life insurance or blood
donations.

=> These industries must be good at tracking down prospects and selling
them on a product’s benefits.

=> Such aggressive selling, however, carries high risks

The Marketing Concept

Customer focus and value are the paths to sales and profits. Instead of a
product-centered make-and-sell philosophy, the marketing concept is a
customer-centered sense-and-respond philosophy.

=> The job is not to find the right customers for product but to find the right
products for customers.

The Societal Marketing Concept

The societal marketing concept questions whether the pure marketing
concept overlooks possible conflicts between consumer short-run wants
and consumer long-run welfare

The societal marketing concept holds that marketing strategy should

deliver value to customers in a way that maintains or improves both the
consumer’s and society’s well-being.

Preparing an Integrated Marketing Plan and Program Marketing mix is the set
into four broad groups, called the four Psof marketing: product, price, place, and
promotion

Building Customer Relationships

Customer relationship management

The overall process of building and maintaining profitable customer relationships by

delivering superior customer value and satisfaction The key to building lasting
customer relationships is to create superior customer value and satisfaction

Customer-perceived value—the customer’s evaluation of the difference between all

the benefits and all the costs of a market offering relative to those of competing
offers.

Customers often do not judge values and costs “accurately” or “objectively.” They act
on perceived value
 Customer satisfaction depends on the product’s perceived performance
relative to a buyer’s expectations.
If the product’s performance falls short of expectations, the customer is dissatisfied.
If performance matches expectations, the customer is satisfied.

If performance exceeds expectations, the customer is highly satisfied or

delighted

Customer Relationship Levels and Tools.

Basic relationships are often use by a company with many low-margin

customers.
Full partnerships are use in markets with few customers and high margins, sellers
want to create full partnership with key customers. Some companies sponsor club
marketing programs that offer members special benefits and create members
communities. Many companies now target fewer, more profitable customers using
selective relationship management to relate more deeply and interactively to
carefully selected customers through blogs, websites, online communities and social
networks

Partner relationship management—involves working closely with partners in others

company departments inside and outside the company to jointly bring more value to
customers.

Capturing Value from Customers

The aim of customers relationship management is to create not just

customer satisfaction, but customer delight. This means that companies
must aim high in building customer relationships.

Companies are realizing that losing a customers means losing more than
a single sale.

=> It means losing customer lifetime value _ the value of the customer
would make over a lifetime of patronage

Growing Share of Customer

Share of Customer is the portion of the customer’s purchasing that

company gets in its product categories

To increase share of customer, firms can offer greater variety to current

customers. Or they can create programs to cross-sell and up-sell to
market more products and services to existing customers
 Customer equity is the total combined customer lifetime values of all of the
company’s current and potential customers.

Clearly, the more loyal the firm’s profitable customers, the higher its
customer equity.

Building the Right Relationships with the Right Customers involves treating
customer as assets that need to be managed and maximized

The Changing Marketing Landscape

The recent technology boom has created a digital age. Beyond competing in
traditional marketplaces, companies now have access to exciting new marketing.
Online marketing is now the fastest growing form of marketing.

Ethics demands _ the call for more ethics and social responsibility. Marketers are
being called upon to take greater responsibility fer the social and environmental
impact of their actions. Forward-looking companies view socially responsibility
actions as an opportunity to do well by doing good.

The Growth of Not-for-Profit Marketing

Not-forprofit organizations, such as colleges, hospitals, museums, zoos, symphony

orchestras, foundations, and even churches. The nation’s not- for-profits face stiff
competition for support and membership. Sound marketing can help them attract
membership, funds, and support.

Real life example: McDonald's 4P business strategy

1. Product
● Products in McDonald's 4P Marketing strategy are the "outputs" that a
business will provide to its target customers.
● McDonald's main product lines include:
- Hamburger and bread
- Chicken and fish
- Salad
- Snacks
- Drinks
- Desserts
- McCafe
 - McDonald's is known mainly for its famous Burger product. Therefore, the
company has been constantly expanding the number of its products.
Customers can now buy chicken and fish, dessert or breakfast at McDonald's
itself. The product element of McDonald's marketing strategy indicates that, if
they want to attract new customers as well as retain existing customers,
companies need to change and refresh their products/services regularly.

2. Place
● The places where you can easily buy McDonald's products are: Restaurants,
kiosks, website and finally McDonald's mobile app.
● Restaurants are where the majority of McDonald's sales are generated. There
are restaurants that also open kiosks to sell limited-edition products, such as
desserts. Some kiosks are temporary, if used during seasonal events or
during professional sports matches. .

3.Promotion
● McDonald's used the following tactics:
- Advertising
- Promotions
- PR
- Direct selling.
● Advertising is the most important form of McDonald's of all. The company has
used from TV, radio, newspapers to online media such as Facebook,
Instagram, Twitter… McDonald's also has a lot of promotions to attract
customers, such as offering coupons. , issue vouchers for a certain product.
In addition, Pr activities such as charity organization Ronald McDonald House
or McDonald's Global Best of Green all help promote business activities very
well.
● From time to time, McDonald's uses a direct sales approach, with partners
such as corporate customers, government and events, and local parties.

An extremely successful advertising campaign of McDonald's is the collaboration

with the famous K-pop group BTS. When the "Idol menu - The BTS Meal" was
released, it stimulated fans to buy when they would be given many attractive gifts.

→ In its 4P Marketing strategy, McDonald's always emphasizes advertising as the main way
to promote products.

4. Price
● McDonald's pricing strategy is a combination of combo pricing (price bundling)
with "psychological" pricing. In the combo price, the company will sell meals
and other product packages at a certain preferential price. In "psychological"
pricing, McDonald's has prices that seem very affordable, such as $ __. 99
instead of rounding it up. It can be said that this is one of the most important
factors to encourage customers to buy products.