1. Principles of Marketing Chapter 1: Marketing: Creating & Capturing Customer Value

2. A Change in Marketing & Its Importance
Firms are “returning to marketing”
Change and Instability in Marketplace
Technology
Economy
Social interests
Shift in Marketing’s “Focus” & “Performers”
From “Transactions” to “Relationships”
Not just “Big M” Marketing anymore; increased “Little M” marketing* (Carver 2009; 2012)
Dr. James Carver – Auburn University

3. Dr. James Carver – Auburn University
What is Marketing?*
“Marketing is the process of planning and executing the conception, pricing, promotion, and distribution of ideas, goods, and services to create the exchanges that satisfy individual and organizational goals.” (1985 AMA Definition)
“Marketing is an organizational function and a set of processes for creating, communicating, and delivering value to customers and for managing customer relationships in ways that benefit the organization and its stakeholders.” *(Lusch and Marshall 2004 AMA Definition)
“Competition for a Differential Advantage.”* (Wroe Alderson 1957)
Dr. James Carver – Auburn University

4. Dr. James Carver – Auburn University
Two Goals of Marketing
Marketing has 2 basic goals:
Attract new customers by providing superior value
Keep & grow existing customers by delivering satisfaction
Can do so iff one has a differential, or long-term competitive, advantage
Dr. James Carver – Auburn University

5. A Marketer’s Basic Toolbox
Value is created on 4 “fronts”
Toolbox ~ “Marketing Mix”
The 4 Ps
Product
Place
Price
Promotion
Dr. James Carver – Auburn University

6. Dr. James Carver – Auburn University
The Marketing Process
5 Most Basic Steps of Marketing
Understand Consumers
Design Customer-Driven Marketing Strategy
Prepare an Integrated Marketing Program
Build Customer Relationships
Capture Value from Customers
Dr. James Carver – Auburn University

7. Consumers’ Needs, Wants, & Demands
State of felt deprivation
Physical, Social, or Individual
Want
Form a need takes as shaped by culture & personality
Demand
Wants backed with buying power
Dr. James Carver – Auburn University

8. Consumers’ Needs, Wants, & Demands
State of felt deprivation
Physical, Social, or Individual
Want
Form a need takes as shaped by culture & personality
Demand
Wants backed with buying power
Culture
Wants
Buying Power
Demands
Dr. James Carver – Auburn University

9. Dr. James Carver – Auburn University
Market Offerings
Customers’ demands are fulfilled through market offerings
Combination of:
Products; Services; Information; & Experiences
Market offering & “Product” (purchased)*
Can be tangible good or intangible service
“Service” are all services used to facilitate & support
Dr. James Carver – Auburn University

10. Dr. James Carver – Auburn University
Market Offering
Traditional “Product” View Has Pitfalls
Marketing Myopia
Paying so much attention to the specific products a company offers that benefits & experiences are overlooked (e.g., Buggy-whip example)
Service-Dominant Logic*
Products are bundles of “services” or “brand experiences”
Spoken in terms of a Value Proposition
Dr. James Carver – Auburn University

11. Value Proposition Examples
Drill Bit Example:
What is really being sold?
Toaster Example?
Disney Example?
Dr. James Carver – Auburn University

12. Value Proposition Examples
Drill Bit Example:
What is really being sold?
Ability to generate a particular sized hole (½” bit = ½” hole)
Toaster Example?
A system for cooking one’s bread and making crispy
Disney World Example?
A world of wonder where dreams come true, not just rides
Dr. James Carver – Auburn University

13. Exchange and Relationships
Marketers make Value Propositions to “Markets” with a goal of “Exchange” over time
Market
The set of actual & potential consumers of a product based upon some shared need or want
Exchange
Obtaining a desired object from someone by offering something in return
Marketers obtain money by offering value propositions that meet or exceed expectations
Relationships, not one-time exchanges, are key.
Dr. James Carver – Auburn University

14. Designing a Customer-Driven Marketing Strategy
Marketing Management
Seeks to answer two questions:
What customers will we serve?
Target markets through market segmentation
How can we serve these customers best?
Development and articulation of the value proposition
Marketing Management
1. Customer
Management
2. Demand
Management
Dr. James Carver – Auburn University

15. Marketing Management Orientations
Five Philosophies of Marketing Management
Production Concept
Product Concept
Selling Concept
Marketing Concept
Societal Marketing Concept
Dr. James Carver – Auburn University

16. Dr. James Carver – Auburn University
Marketing Concept
A management philosophy which advocates that a firm:
Exists to identify and satisfy the needs of its customers
Customer orientation
That a customer orientation is accomplished through an integrative effort throughout the firm
Integrated effort
That the firm’s focus should be long-term and seek to provide a satisfactory return on owner’s investment (ROI)
Long-term profit orientation
Dr. James Carver – Auburn University

17. Societal Marketing Concept
A management philosophy which advocates that a firm:
Follow the traditional marketing concept, yet consider how changes in any portion of one’s offering might enhance…
Consumers’ and society’s immediate well-being
Consumers’ long-term interests
Opportunity for future generations to meet their needs (i.e., sustainable marketing)
Dr. James Carver – Auburn University

18. An Integrated Marketing Program
One’s marketing strategy “in action”, or…
A Marketer’s Toolbox…
The “Marketing Mix”
The 4 Ps
Product
Place
Price
Promotion
Value is created on these 4 “fronts”
Dr. James Carver – Auburn University

19. CRM: Customer Relationship Management
Customer data management
Leveraging detailed information & customer “touchpoints” (interactions) to maximize loyalty.
Maximization of customer delivered value through the management of customers
Acquisition,
Retention, and
Growth
Dr. James Carver – Auburn University

20. Building Blocks of a Relationship (Value)
Is “customer perceived”
Largely idiosyncratic* but generalizable based on “themes” (segmentation)
Drivers include:
Convenience
“Total” cost
Selling Price
Authenticity
Exclusivity
Finishes
Conspicuousness (referent power)
Dr. James Carver – Auburn University

21. Building Blocks of a Relationship (Customer Satisfaction)
The difference between one’s perceived performance (i.e., experience) & expectations
A “net loss” ~ dissatisfied
A “net neutral” ~ satisfied
A “net positive” ~ highly satisfied or “delighted”
Likely to become “customer evangelists”
“Indirect” driver of firm performance (e.g., sales)
Yet, maximization is not the goal
Must know break-even point for all services provided*
Dr. James Carver – Auburn University

22. Consumer Spending and “Lagged” Satisfaction (ACSI)*
Note the larger lag during & after the “Great Recession” – consumers must also have funds available in order to purchase
Dr. James Carver – Auburn University

23. Appropriate Levels of Customer Relationship
“Closeness” is a function profitability
Considered in terms of a continuum
Low Margin customers
“Basic” relationship is best
Relationships only through websites, apps, advertising, etc.
High Margin customers
“Full Partnership” is possible
Relationship with constant, personal communication; information sharing, etc.
Tools to enhance “bond” and profitability include:
Frequency marketing programs & Club Memberships
Goal is to enhance loyalty through switching costs
Dr. James Carver – Auburn University

24. Changing Nature of Customer Relationships
From “Mass Marketing” to “Selected” Relationships
Customer Profitability Analysis During…
Customer Acquisition
No longer “Seining” for all fish in the sea
Surveys, Credit ratings, etc.
Customer Retention
80/20 Rule*
Fire “Poor” or “High Maintenance” customers
“Segmentation for termination” purposes
Example: Sprint termination letter, gift cards to competitors, etc.
Dr. James Carver – Auburn University

25. Interactive Customer Relationships
Fueled by technology and social media
No longer marketing by intrusion
Mass marketing is naturally intrusive and designed to interrupt one’s attention
Marketing by attraction
Marketing that includes consumers
Use of social media and technology isn’t enough
Co-creation is key
Gives up control, yet
Gains authenticity & engagement (part of the conversation)
A delicate balancing act to ensure hijacking is curtailed
Dr. James Carver – Auburn University

26. Partner Relationship Management
Both Intra- and Inter-firm partners
Intra-firm partners
No longer is marketing the only function representing the customer
Non-marketers performing marketing
Inter-firm partners
Marketing messages must be managed throughout and across the entire channel
Dr. James Carver – Auburn University

27. Capturing Value from Customers
Value is captured from customers via…
Current and future sales, market share, and profit.
Key outcomes of customer value include…
Customer loyalty & retention
5 times as much to get a “new” customer
Greater share of “market” and “customer”, and
Growth in customer equity
Dr. James Carver – Auburn University

28. Dr. James Carver – Auburn University
Customer Equity
The total combined customer lifetime values (CLVs) of all the company’s current & future customers
Customer Lifetime Value
The value of the entire stream of purchases that the customer would make over a lifetime of patronage
Consider the cost of losing just one customer
UPS example
Why customers must be managed based on profitability
Recall 80/20 rule
Dr. James Carver – Auburn University

29. Drivers of Change in Marketing
Economy
Technology
Non-profit marketing
Globalization
Sustainable marketing
Dr. James Carver – Auburn University