1. Marketing: Creating and Capturing Customer Value
Chapter

2. Chapter Outline What is Marketing?
Understanding the Marketplace and Customer Needs
Designing a Customer-Driven Marketing Strategy
Preparing an Integrated Marketing Plan and Program
Building Customer Relationships
Capturing Value from Customers
The Changing Marketing Landscape

3. Previewing the Concepts
Define marketing and the marketing process.
Explain the importance of understanding customers and identify the five core marketplace concepts.
Identify the elements of a customer-driven marketing strategy and discuss the marketing management orientations that guide strategy.
Discuss customer relationship management and identify strategies for creating value for and capturing value from customers.
Describe the major trends and forces that are changing the marketing landscape.
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4. What Is Marketing?
Simple definition: Marketing is managing profitable customer relationships.
Goals:
Attract new customers by promising superior value.
Keep and grow current customers by delivering satisfaction.
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5. Making a sale—“telling and selling” Satisfying customer needs
Marketing Defined
Marketing is the process by which companies create value for customers and build strong customer relationships in order to capture value from customers in return.
OLD view of marketing:
Making a sale—“telling and selling”
NEW view of marketing:
Satisfying customer needs
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6. Figure 1.1: A Simple Model of the 5-Step Marketing Process
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7. Core Concepts
Marketers must understand core customer & marketplace concepts:
Needs, wants, and demands.
Market offerings.
Value and satisfaction.
Exchanges and relationships.
Markets.
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8. Needs, Wants, and Demands
Needs: State of felt deprivation including physical, social, and individual needs.
Physical, social, and individual needs.
Wants: Form that a human need takes, as shaped by culture and individual personality.
Wants + Buying Power = Demand.
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9. Needs, Wants, and Demands
Types of Needs:
Physical needs:
Food, clothing, shelter, safety.
Social needs:
Belonging, affection.
Individual needs:
Learning, knowledge, self-expression.
Is ice cream a “need”?
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10. Customer 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.
Customer needs and wants are fulfilled through market offerings
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11. Marketing in Action
Market offerings are not limited to physical products. UNCF powerfully markets the idea that “A mind is a terrible thing to waste.”
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12. Marketing Myopia Marketing myopia:
Occurs when sellers pay more attention to the specific products they offer than to the benefits and experiences produced by the products.
Focusing only on the existing “wants” and losing sight of the underlying consumer “needs.”
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13. Avoiding Marketing Myopia
Marketing Myopia is management’s failure to recognize the scope of its business.
To avoid marketing myopia, companies must broadly define organizational goals toward consumer needs
Focus on benefits

14. Customer Value and Satisfaction
Care must be taken when setting expectations for market offerings:
If performance is lower than expectations, satisfaction is low.
If performance is higher than expectations, satisfaction is high.
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15. Customer Value and Satisfaction
Expectations
Customers
Value and satisfaction
Marketers
Set the right level of expectations
Not too high or low
Note to Instructor:
This Web link connects to online shoe retailer zappos.com. You can link to the site and see how this retailer creates value for the consumer. Explore features including customer reviews, online LIVE customer service, free shipping (including returns). Ask students what other online retailers deliver exceptional value and satisfaction.
Discussion Question
Why do marketer’s not always understand customer needs? How can they better identify customer needs?
Marketer’s often work in a vacuum and do not consider the customer’s needs as much as they should. Future chapters will talk about market research and marketing information, important tools for understanding customer’s needs. Students might be familiar with survey research or focus groups as techniques for gathering information or they might be asked for their zip code when they purchase in certain retailers 15

16. Marketing in Action
Advertising sets expectations, and marketers must be careful not to promise too much.
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17. Exchanges and Relationships
Act of obtaining a desired object from someone by offering something in return.
What would be exchanged for a vacation?
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18. Exchanges and Relationships
Marketing actions build and maintain relationships with target audiences involving an idea, product, service, or other object.
Marketers build strong relationships by consistently delivering superior customer value.
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19. What Is a Market? A market:
Is the set of actual and potential buyers of a product.
These people share a need or want that can be satisfied through exchange relationships.
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20. Marketing system consists of all of the actors (suppliers, company, competitors, intermediaries, and end users) in the system who are affected by major environmental forces.
Demographic
Economic
Physical
Technological
Political-legal
Socio-cultural
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21. Figure 1.2: A Modern Marketing System
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22. Marketing Management
The art and science of choosing target markets and building profitable relationships with them.
Aim is to find, attract, keep, and grow customers by creating, delivering, and communicating superior value.
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23. Marketing Management
Designing a winning marketing strategy requires answers to the following questions:
1. What customers will we serve?
— What is our target market?
2. How can we best serve these customers?
— What is our value proposition?
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24. Selecting Customers to Serve
Market Segmentation:
Dividing the market into segments of customers.
Market Targeting:
Selecting one or more segments to cultivate.
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25. Choosing a Value Proposition
The set of benefits or values a company promises to deliver to consumers to satisfy their needs.
Value propositions dictate how firms will differentiate and position their brands in the marketplace.
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26. Marketing in Action
Many firms are emphasizing the “value” in their value proposition during tough economic times.
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27. Marketing Management Orientations
Organizations design and carry out their marketing strategies under five alternate concepts:
Production Concept.
Product Concept.
Selling Concept.
Marketing Concept.
Societal Marketing Concept.
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28. Marketing Management Orientations
The production concept is the idea that consumers will favor products that are available or highly affordable.
The product concept is the idea that consumers will favor products that offer the most quality, performance, and features for which the organization should therefore devote its energy to making continuous improvements.
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29. Marketing Management Orientations
The selling concept is the idea that consumers will not buy enough of the firm’s products unless it undertakes a large scale selling and promotion effort.
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30. The Marketing Concept The marketing concept:
A marketing management philosophy that holds that achieving organizational goals depends on knowing the needs and wants of target markets and delivering the desired satisfaction better than competitors.
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31. Figure 1.3: The Selling and Marketing Concepts Contrasted
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32. The Societal Marketing Concept
The idea that a company’s marketing decisions should consider consumer’s wants, the company’s desires, consumers’ long-run interests and society’s long-run interests.
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33. Figure 1.4: The Considerations Underlying the Societal Marketing Concept
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34. Marketing in Action
Johnson & Johnson’s credo stresses putting people before profits—the societal marketing concept in action.
Visit The Body Shop’s Web site for another example of a firm which practices the societal marketing concept.
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35. The Integrated Marketing Plan
Transforms the marketing strategy into action.
Includes the marketing mix and 4 Ps of marketing:
Product.
Price.
Place (Distribution).
Promotion.
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36. Customer Relationship Management
The overall process of building and maintaining profitable customer relationships by delivering superior customer value and satisfaction.
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37. Building Customer Relationships
Customer relationship management (CRM):
Deals with all aspects of acquiring, keeping, and growing customers.
Customer value and satisfaction are key.
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38. Customer Perceived Value
Customer’s evaluation of the difference between all of the benefits and all of the costs of a marketing offer relative to those of competing offers.
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39. Customer Perceived Value
Perceptions may be subjective.
To some customers “value” might mean paying more to get more.
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40. Customer Satisfaction
Extent to which the product’s perceived performance matches a buyer’s expectations.
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41. Customer Satisfaction
High levels of customer satisfaction often leads to consumer loyalty.
Some firms seek to DELIGHT customers by exceeding expectations.
Profitability must be considered.
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42. Customer Relationships
Firms may choose to build relationships at different levels.
Loyalty and retention programs build relationships and may include:
Frequency marketing programs.
Club marketing programs.
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43. Changing Nature of Relationships
Customer profitability analysis eliminates losing customers and selects profitable ones with whom relationships should be developed.
American Express attempted to weed out unprofitable customers by offering them $300 in exchange for paying off their balances and closing their accounts.
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44. Changing Nature of Relationships
Firms now relate more deeply and interactively via blogs, social network Web sites, , and video sharing.
Embracing customer-managed relationships requires marketing via attraction rather than intrusion.
Consumer-generated marketing has become a significant marketing force.
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45. Marketing in Action
H.J. Heinz attempted to harness consumer-generated marketing and received 8,000 entries in a homemade ad contest for its ketchup brand on YouTube.
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46. Partner Relationship Management
Marketing partners help create customer value and assist in building customer relationships.
Partners inside the firm:
Cross-functional customer teams.
Partners outside the firm:
Supply chain management.
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47. Capturing Value From Customers
Value is captured from customers via current and future sales, market share and profit.
Superior customer value leads to highly satisfied loyal customers who buy more.
Key outcomes of customer value include customer loyalty and retention, share of market, share of customer, and customer equity.
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48. Capturing Value From Customers
Customer lifetime value
The value of the entire stream of purchases that the customer would make over a lifetime of patronage.
Share of customer
The portion of the customer’s purchasing that a company gets in their product categories.
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49. Customer Equity
The total combined customer lifetime values of all the company’s current and potential customers.
Manage equity by:
Classifying customers by projected loyalty and potential profitability.
Manage each group accordingly.
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50. Figure 1.5: Customer Relationship Groups
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51. Changing Marketing Landscape
The uncertain economic environment.
The digital age.
Rapid globalization.
Sustainable marketing – call for more social responsibility.
Growth of not-for-profit marketing.
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52. So, What Is Marketing? Pulling It All Together52

53. Reviewing the Concepts
Define marketing and the marketing process.
Explain the importance of understanding customers and identify the five core marketplace concepts.
Identify the elements of a customer-driven marketing strategy and discuss the marketing management orientations that guide strategy.
Discuss customer relationship management and identify strategies for creating value for and capturing value from customers.
Describe the major trends and forces that are changing the marketing landscape.
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