1. CHAPTER 1 Marketing: Creating and Capturing Customer Value Objective: Introducing the basic concepts and philosophies of marketing.

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

3. What is Marketing? Marketing is managing profitable customer relationships Marketing is NOT synonymous with “sales” or “advertising ”

4. What Can Be Marketed? Goods Goods Services (information, experiences...) Services (information, experiences...) Places Places Events Events Persons Persons Properties Properties Organizations Organizations Ideas Ideas

5. The Marketing Process

6. Core Concepts of Marketing Needs, wants, and demans Needs, wants, and demans Marketing offers (products, services etc.) Marketing offers (products, services etc.) Value and satisfaction Value and satisfaction Exchange, transactions and relationships Exchange, transactions and relationships Markets Markets

7. 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 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

8. 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.

9. 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?

10. 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.

11. 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.

12. 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.

13. 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.

14. In summary, Marketing means managing markets to bring about exchanges and relationships for the purpose of creating value and satisfying needs and wants while making profit. Exchange process involve work. Marketers must identify customer needs, design right products, set right prices, promote and deliver (place) the products in the right ways.

15. Marketing Management Marketing management is “the art and science of choosing target markets and building profitable relationships with them.” Creating, delivering and communicating superior value is key.

16. Marketing Management Customer management: Customer management: Marketers select customers that can be served well and profitably. Marketers select customers that can be served well and profitably. Demand management: Demand management: Marketers must deal with different demand states ranging from no demand to too much demand. Marketers must deal with different demand states ranging from no demand to too much demand.

17. Marketing Management Philosophies There are five concepts that organizations conduct their marketing activities: Production, Product, Selling, Marketing Societal marketing concepts.

18. The Production Concept 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.

19. The Product Concept 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.

20. The Selling Concept 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. This concept focuses on creating sales transactions rather than on building long- term, profitable relationships with customers.

21. The Marketing Concept   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.

22. The Societal Marketing Concept 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. 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.

23. CRM Attracting, retaining and growing customers Attracting, retaining and growing customers Customer value and satisfaction Customer value and satisfaction Loyalty and retention Loyalty and retention Growing customer share (cross-selling) Growing customer share (cross-selling) Building relationships and customer equity Building relationships and customer equity Customer equity: Total combined customer lifetime values of all customers (e.g. Cadillac – high-performance designs that target a younger generation of consumers). Measures firm’s performance in a future-looking manner. Customer equity: Total combined customer lifetime values of all customers (e.g. Cadillac – high-performance designs that target a younger generation of consumers). Measures firm’s performance in a future-looking manner.