CHAPTER 1 Marketing in a Changing World: Creating Customer Value and Satisfaction Objective: Introducing the basic concepts and philosophies of marketing.

What is Marketing? Marketing is the management of creating and exchanging products and value in order to satisfy the needs and wants. Marketing satisfy customers at a profit. The goal of marketing is (1) to attract new customers by promising superior value (e.g. Ritz-Carlton “memorable experiences”, “Always Coca Cola”) and (2) to keep current customers by delivering satisfaction.

Needs, Wants, and Demands Consumers have needs (physical, social, individual etc.) wants, and demands to be satisfied. Consumers view products as bundles of value (benefits) and choose products that give them the best value for their money. E.g. Honda Civic  transportation, low price, fuel economy; Mercedes  comfort, luxury, status

Products A product (persons, places, organizations, activities, ideas) is anything that can satisfy a need or want. Producers must see themselves as providing a solution to a need rather than just selling a product. Otherwise, when a new product satisfies the needs better or less expensively, they would not make money. Research is a must to understand the needs and wants of the customers to produce the right product. E.g. At Disney World, each manager spends a day in the park in a Mickey costume or work on the front line - taking tickets, selling pop-corn.

Value, Satisfaction, and Quality How do customers choose among these many products? Consumers make choices based on; Value; is the difference between owning the product and the cost of obtaining the product, in an way “profit” to the customer. Customers do not judge product values objectively, on the contrary they act on perceived value. E.g. Is Hilton really the best hotel company?

Satisfaction; is the difference between the product’s performance and buyer’s expectations. If the product’s performance falls short of expectations, the buyer is dissatisfied. If the performance matches or exceeds expectations, the buyer is satisfied. Smart companies aim to satisfy customers by promising only what they can give, then giving more than they promise. Benefit of satisfying customers: Customer satisfaction create an emotional tie (customer loyalty) to a product. Highly satisfied customers make (1) repeat purchases, (2) are less price sensitive, (3) talk positively to their friends.

Quality; simply quality can be defined as “freedom from defects” Quality; simply quality can be defined as “freedom from defects”. Today, most companies define quality in terms of customer satisfaction. E.g. according to Motorola “if the customer doesn’t like the product, it’s a defect”. Quality starts with customer needs and ends with customer satisfaction. The concept of “total quality management” is in a away “total customer satisfaction”. Improving the quality of a product that customers want increases customer satisfaction, therefore increases profit.

Exchange, Transactions, and Relationships Marketing occurs when people decide to satisfy needs and wants through exchange. Exchange (transaction) is the act of getting an object (product, service, idea …) from someone by giving something in return. Marketing should create mutually beneficial relationships (good for both parties) to generate profitable transactions. Marketing is the art of attracting and keeping profitable customers.

Markets A market is the set of actual and potential buyers of a product. These buyers share a particular need or want that can be satisfied through exchanges and relationships. The size of the market depends on the number of people (1) who have the need, (2) have resources (money) for the exchange and (3) want to spend these resources in the exchange.

Marketing Marketing means managing markets to bring about exchanges and relationships for the purpose of creating value and satisfying needs and wants. Exchange process involve work. Sellers must identify customer needs, design right products, set right prices, promote and deliver the products in the right ways. These are the core marketing principles.

Marketing Management Marketing management is the analysis, planning, implementation, and control of programs to create exchanges with target buyers to achieve organizational objectives. In a way, marketing management is demand - customer management. A company’s demand comes from two groups: new customers and repeat customers. Marketing management deals with finding ways (1) to attract new customers and create transactions with them and also (2) to retain current customers and build lasting customer relationships.

Marketing Management Philosophies There are five concepts that organizations conduct their marketing activities: the production, product, selling, marketing and societal marketing concepts. The Production Concept; holds that consumers will favor products that are available and highly affordable. Here, the management focus on improving production and distribution. This oldest philosophy is useful in two types of

situation. (1) when the demand for a product exceeds the supply (2) when the product’s cost is too high and improved productivity is needed to bring it down. E.g. Henry Ford’s “Model T”, TI watches. The Product Concept; holds that consumers favor products that offer the most quality, performance and innovative features. Here, the organization should focus on making continuous product improvement. The Selling Concept; holds that consumers do not buy enough products if there are not large-scale selling and promotion effort. Most

companies use the selling concept when they have overcapacity companies use the selling concept when they have overcapacity. This concept focuses on creating sales transactions rather than on building long-term, profitable relationships with customers. The Marketing Concept; holds that achieving organizational goals (making profit) depends on understanding the needs and wants of target markets and delivering the desired satisfactions more effectively and efficiently than competitors do. E.g. Disney, McDonald’s, Bosch… are customer-driven companies.

The Societal Marketing Concept; holds that the organization should not only satisfy the needs and wants but also improve both customer’s and society’s well-being. This newest philosophy focus on customer long-term welfare, since today we have environmental problems, resource shortages, population growth etc. E.g. Critics against fast-food restaurants that food has a lot of fat and salt harmful for health, a lot of packaging increasing waste and pollution. Here, the companies try to balance (1) company profits, (2) consumer wants, (3) society’s interests.