ArmstrongKotler 11e Ch01 Ge

Marketing - Creating and Capturing Customer Value

Chapter 1Global Edition

Copyright 2013, Pearson Education

Rest Stop: Previewing the ConceptsDefine marketing and outline the steps in the marketing processExplain the importance of understanding customers and the marketplace and identify the five core marketplace conceptsIdentify the key elements of a customer-driven marketing strategyCopyright 2013, Pearson Education 1-*


Rest Stop: Previewing the ConceptsDiscuss customer relationship management and identify strategies for creating value for customers and capturing value from customers in returnDescribe the major trends and forces that are changing the marketing landscape in this age of relationships

Copyright 2013, Pearson Education 1-*


First Stop: FlyDubai: Simplicity is KeyFlyDubai aims to please their customers by creating value so they leave the plane looking forward to their next flight. FlyDubai believes that a customer relationship is the secret to a successful business and simplicity is the key. Copyright 2013, Pearson Education 1-*


What Is Marketing?The process by which companies create value for customers and build strong customer relationships in order to capture value from customers in returnGoalsAttract new customers by promising superior valueKeep and grow current customers by delivering satisfactionCopyright 2013, Pearson Education 1-*


Figure 1.1 - A Simple Model of the Marketing Process



Understanding the Marketplaceand Customer NeedsMarketers must understand five core customer and marketplace concepts:Needs, wants, and demandsMarket offerings ( products , services , and experiences )Value and satisfactionExchanges and relationshipsMarketsCopyright 2013, Pearson Education 1-*


Customer Needs, Wants, and DemandsTypes of needsPhysical needsFood, clothing, warmth, and safetySocial needsBelonging and affectionIndividual needsLearning, knowledge, and self-expressionCopyright 2013, Pearson Education 1-*


Market OfferingsProducts, Services, and ExperiencesNot limited to physical productsInclude entities such as persons , places , organizations, information, and ideasThe U.S. Forest Service markets the idea of reconnecting young people with exploring the joys of nature firsthandCopyright 2013, Pearson Education 1-*


Customer Value and SatisfactionCustomers form expectations about the value and satisfaction that various market offerings will deliver If marketers set expectations too low, they may satisfy those who buy but fail to attract enough buyersIf marketers set expectations too high, buyers will be disappointedCopyright 2013, Pearson Education 1-*


Exchanges and RelationshipsExchange: The act of obtaining a desired object from someone by offering something in return RelationshipsMarketing actions build and maintain exchange relationships with target audiences involving an idea, product, service, or other objectMarketers build strong relationships by consistently delivering superior customer value



Designing a Customer-Driven Marketing StrategyDesigning a winning marketing strategy requires answers to the following questions:What customers will we serve (whats our target market)?How can we serve these customers best (whats our value proposition)?Copyright 2013, Pearson Education 1-*


Selecting Customers to ServeMarket segmentation - Dividing the market into segments of customersTarget marketing - Selecting one or more segments to cultivate



Choosing a Value PropositionValue proposition: The set of benefits or values a company promises to deliver to consumers to satisfy their needs

The smart car is positioned as compact, yet comfortable; agile, yet economical; and safe, yet ecological.Copyright 2013, Pearson Education 1-*


Marketing Management OrientationsOrganizations design and carry out their marketing strategies under five alternate concepts:Production conceptProduct conceptSelling conceptMarketing conceptSocietal Marketing conceptCopyright 2013, Pearson Education 1-*


The Production Concept Consumers will favor products that are available and highly affordableThe organization should focus on improving production and distribution efficiencyCopyright 2013, Pearson Education 1-*


The Product Concept Consumers will favor products that offer the most quality, performance, and featuresThe organization should devote its energy to making continuous product improvementsCopyright 2013, Pearson Education 1-*


The Marketing Concept Achieving organizational goals depends on knowing the needs and wants of target markets and delivering the desired satisfactions better than competitors do



The Societal Marketing ConceptA companys marketing decisions should consider consumers wants, the companys desires, consumers long-run interests and societys long-run interests1-*Copyright 2013, Pearson Education 1-*


The Societal Marketing ConceptCalls for sustainable marketingsocially and environmentally responsible marketing that meets the present needs of consumers while also preserving the ability of future generations to meet their needsAccording to UPS, socialresponsibility isnt just good for the planet. Its good for business.Copyright 2013, Pearson Education 1-*


Preparing an Integrated MarketingPlan and ProgramMarketing mix tools ProductPricePlace (Distribution)PromotionThe firm must blend each marketing mix tool into a comprehensive integrated marketing programCopyright 2013, Pearson Education 1-*


Customer RelationshipsFirms may choose to build relationships at different levelsLoyalty and retention programs to build relationships includeFrequency marketing programsClub marketing programs

JetBlue Airways offers its TrueBlue members frequent-flyer points they can use on any seat on any JetBlue flight with no blackout datesCopyright 2013, Pearson Education 1-*


The Changing Nature of CustomerRelationshipsCustomer profitability analysis eliminates losing customers and selects profitable ones with whom relationships should be developed



Changing Nature of RelationshipsFirms interact with customers using new technologies such as social networking, e-mail, Web sites, blogs, cell phones, and video sharingCold Stone Creamery uses a variety of social media to engage customers on a more personal, interactive levelCopyright 2013, Pearson Education 1-*


Consumer-Generated MarketingBrand exchanges created by consumers by which consumers play an increasing role in shaping their own brand experiences and those of other consumersHarnessing consumer-generated marketing: H. J. Heinz invitedconsumers to submit homemade ads for its ketchup brand on YouTubeCopyright 2013, Pearson Education 1-*


Partner Relationship ManagementWorking closely with others inside and outside the company to jointly bring more value to customersPartners inside the firm:Cross-functional teamsPartners outside the firm:Supply chain and channel partnersCopyright 2013, Pearson Education 1-*


Capturing Value From CustomersSuperior customer value leads to highly satisfied loyal customers who buy more

Stew Leonards customer service policy emphasizes the importance of bringing customers back to the stores for repeat salesCopyright 2013, Pearson Education 1-*


Customer EquityThe total combined customer lifetime values of all the companys current and potential customers1-*To increase customer lifetime valueand customer equity, Cadillac needs to make the Caddy cool again bytargeting a younger generation of customersCopyright 2013, Pearson Education 1-*


The Changing Marketing LandscapeEconomic uncertaintiesGrowth in digital technologyRapid globalizationSustainable marketing Growth of not-for-profit marketingIn the current economic environment, companies must emphasize the value in their value propositions, as Target did when it shifted the balance more toward the Pay Less half of its Expect More. Pay Less positioningCopyright 2013, Pearson Education 1-*


Marketing at WorkThe recession from 2008 to 2009 undermined consumer confidenceThe post-recession era has seen a shift in spending patterns, with consumers becoming more frugalEven as the economy strengthens, rather than reverting to their old free-spending ways, consumers are now showing an enthusiasm for sensible consumption not seen in decadesCopyright 2013, Pearson Education 1-*


Rest Stop: Reviewing the ConceptsDefine marketing and outline the steps in the marketing processExplain the importance of understanding customers and the marketplace and identify the five core marketplace conceptsIdentify the key elements of a customer-driven marketing strategy



Rest Stop: Reviewing the ConceptsDiscuss customer relationship management and identify strategies for creating value for customers and capturing value from customers in returnDescribe the major trends and forces that are changing the marketing landscape in this age of relationshipsCopyright 2013, Pearson Education 1-*


All rights reserved. No part of this publication may be reproduced, stored in a retrieval system, or transmitted, in any form or by any means, electronic, mechanical, photocopying, recording, or otherwise, without the prior written permission of the publisher. Printed in the United States of America.Copyright 2013 Pearson EducationCopyright 2013, Pearson Education 1-*


*****Note to Instructor: Students can be asked to compare old and new advertising campaigns for a few brands to determine if the changed view of marketing is reflected in the advertising messages used by the brands.*In the first four steps, companies work to understand consumers, create customer value, and build strong customer relationships. In the final step, companies reap the rewards of creating superior customer value.*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, french fries, and a soft drink. A person in Papua, New Guinea, needs food but wants taro, rice, yams, and pork. Wants are shaped by ones society and are described in terms of objects that will satisfy those needs.**Note to Instructors: Ask students to consider some well-known examples of marketing myopia and develop strategies to help companies avoid marketing myopia in the future.*Not to Instructors: Each party in the marketing system adds value to the transaction. For example, Walmart cannot fulfill its promise of low prices unless its suppliers provide low costs. Ford cannot deliver a high quality car-ownership experience unless its dealers provide outstanding service. The arrows in the diagram represent all the relationships that must be developed and managed to create customer value and profitable customer relationships.**Note to Instructors: List the various criteria on which markets can be segmented. Present students with a hypothetical product and ask them to develop a segmentation plan for that product. Students must justify their choice of segmentation criteria.*Note to Instructors: A company must decide how it will serve targeted customershow it will differentiate and position itself in the marketplace. A brands value proposition is the set of benefits or values it promises to deliver to consumers to satisfy their needs. For instance, BMW promises the ultimate driving machine, whereas the diminutive Smart car suggests that you Open your mind to the car that challenges the status quo. Such value propositions differentiate one brand from another. They answer the customers question, Why should I buy your brand rather than a competitors?*Note to Instructors: An example of companies who follow the production concept are personal computer maker Lenovo and home appliance maker Haier, which dominate the highly competitive, price-sensitive Chinese market through low labor costs, high production efficiency, and mass distribution. However, although useful in some situations, the production concept can lead to marketing myopia.**Note to Instructors: The selling concept takes an inside-out perspective. It starts with the factory, focuses on the companys existing products, and calls for heavy selling and promotion to obtain profitable sales. It focuses primarily on customer conquestgetting short-term sales with little concern about who buys or why. In contrast, the marketing concept takes an outside-in perspective. The marketing concept starts with a well-defined market, focuses on customer needs, and integrates all the marketing activities that affect customers. In turn, it yields profits by creating relationships with the right customers based on customer value and satisfaction.*Note to InstructorThe text describes UPS as a good example of a company that follows the societal marketing concept. UPS proactively seeks opportunities to act responsibly. For example, UPS employees have volunteered millions of hours to United Ways Live United campaign to improve the education, income, and health of the nations communities. UPS knows that doing whats right benefits both consumers and the company.

***Note to Instructor: Ask students to describe the ways in which they themselves initiate and maintain relationships with brands. Students can suggest ways by which marketers can make it easier for customers to interact with the company or brand.*Note to Instructors: Explain that losing a customer means losing more than a single sale. It means losing the entire stream of purchases that the customer would make over a lifetime of patronage. For example, the average customer at Stew Leonards spends about $100 a week, shops 50 weeks a year, and remains in the area for about 10 years. If this customer has an unhappy experience and switches to another supermarket, Stew Leonards has lost$50,000 in lifetime revenue. The loss can be much greater if the disappointed customer shares the bad experience with other customers and causes them to defect. In fact, a company can lose money on a specific transaction but still benefit greatly from a long-term relationship. This means that companies must aim high in building customer relationships. *Note to Instructors: Discuss the case of Cadillac given in the test. Though Cadillac had a huge share of the luxury car market, most of its buyers were in the older age brackets and average customer lifetime value was falling. In recent years, Cadillac has struggled to make the Caddy cool again by targeting a younger generation of consumers, in order to maximize the customer lifetime value of these customers.*Note to Instructors: Each of the four customer relationship groups requires a different relationship management strategy. The company will not gain anything by investing time and resources in developing relationships with strangers. For butterflies, the company should create satisfying and profitable transactions, capturing as much of their business as possible in the short time during which they buy from the company. Efforts to convert butterflies into loyal customers are rarely successful. True friends have the potential to generate good profit for the company. The firm should make continuous relationship investments to delight these customers and nurture, retain, and grow them. The company may be able to improve the profitability of barnacles by selling them more, raising their fees, or reducing service to them. However, if they cannot be made profitable, they should be fired.**Note to Instructors: Discuss what the move towards sensible consumption means for marketers. How does this shift in the consumer mind-set influence product, pricing, promotion and distribution decisions?*Note to Instructors: The underlying concept of the entire text is that marketing creates value for customers in order to capture value from customers in return. Throughout the marketing process, marketers practice customer relationship management to create customer satisfaction and delight. In creating customer value and relationships, however, the company cannot go it alone. It must work closely with marketing partners both inside the company and throughout its marketing system. Thus, beyond practicing good customer relationship management, firms must also practice good partner relationship management.***

ArmstrongKotler 11e Ch01 Ge

Documents

Transcript of ArmstrongKotler 11e Ch01 Ge