Ch01

Copyright 2000 Prentice Hall

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Chapter 1Chapter 1

Marketing :

Creating and Capturing Customer Value


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What is Marketing?What is Marketing?

• Marketing is the activity, set of institutions, and processes for creating, communicating, delivering, and exchanging offerings that have value for customers, clients, partners, and society at-large.

• More simply: Marketing is the delivery of customer satisfaction at a profit.


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What Motivates a Consumerto Take Action?What Motivates a Consumerto Take Action?

• NeedsNeeds – NOT invented by marketers. They are a basic parts of human makeup:states of felt deprivation including physicalphysical needs for food, socialsocial needs for belonging and individualindividual needs for self-expression. E.g. I am thirsty.

• WantsWants - form that a human need takes as shaped by culture and individual personality. E.g. I want a coca-cola.

• DemandsDemands - human wants backed by buying power. E.g. I have money to buy a coca-cola.


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Marketing OffersMarketing Offers

• ProductsProducts - anything that can be offered to a market to satisfy a need or want.

• Products also include: Persons, Places, Organizations, Activities, and Ideas.

• ServicesServices - activities or benefits offered for sale that are essentially intangible and don’t result in the ownership of anything.

• Examples: banking, airlines, haircuts, and hotels.

Marketing Offer: Some combination of products, services, information,Or experiences offered to a market to satisfy a need or want.


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• ExperiencesExperiences – marketers look beyond the attributes of the products and services they sell. They create brand meaning and brand experiences for customers.

• Coca-Cola

• Nike/Nike Town

• Disney World

Marketing Offers (Cont.)Marketing Offers (Cont.)


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MarketMarket

• “Market” in marketing term:A set of all actual and potential buyers of a product or service.

• “Market” in financial term:

• What is the“commodity market”?


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Marketing ManagementPhilosophies(1)Marketing ManagementPhilosophies(1)

Production ConceptProduction Concept

• Demand exceeds supply

• Consumers favor products that are available and highly affordable

• Improve production and distribution

• Run a risk of focusing too narrowly on their own operation• Texas Instrument: digital watch

• Demand exceeds supply

• Consumers favor products that are available and highly affordable

• Improve production and distribution

• Run a risk of focusing too narrowly on their own operation• Texas Instrument: digital watch


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Product ConceptProduct Concept

• Increasing competition • Consumers favor products that offer the most quality, performance, and innovative features

• Continuous product improvement

• lead to Marketing Myopia• Railroad: trains vs. transportation

• Increasing competition • Consumers favor products that offer the most quality, performance, and innovative features

• Continuous product improvement

• lead to Marketing Myopia• Railroad: trains vs. transportation


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Selling ConceptSelling Concept

• Over capacity • Consumers will not buy enough of the organization’s products unless the organization undertake a large-scale promotion/selling

• Track down prospects and selling them on product benefits• Sell what they make rather than what the market want• focus on transactions not long-term relationship• Unsought goods: encyclopedias, insurance

• Over capacity • Consumers will not buy enough of the organization’s products unless the organization undertake a large-scale promotion/selling

• Track down prospects and selling them on product benefits• Sell what they make rather than what the market want• focus on transactions not long-term relationship• Unsought goods: encyclopedias, insurance


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Marketing ConceptMarketing Concept

• Focuses on needs/ wants of target markets & delivering satisfaction more effectively & efficiently than competitors

• Total customer satisfaction• Procter & Gamble, Marriot, Nordstrom, L.L.Bean

• Overlook conflicts between consumer short-run wants and long-run welfare

• Focuses on needs/ wants of target markets & delivering satisfaction more effectively & efficiently than competitors

• Total customer satisfaction• Procter & Gamble, Marriot, Nordstrom, L.L.Bean

• Overlook conflicts between consumer short-run wants and long-run welfare


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Selling vs. MarketingConcepts ContrastedSelling vs. MarketingConcepts Contrasted

FactoryExistingProducts

Sellingand

Promoting

Profitsthrough Sales

Volume

MarketCustomer

NeedsIntegratedMarketing

Profitsthrough Customer

Satisfaction

StartingPoint

Focus Means Ends

The Selling Concept: inside-out

The Marketing Concept: Outside-in


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Marketing Management Philosophies (5)Marketing Management Philosophies (5)

Society(Human Welfare)

Society(Human Welfare)

Consumers(Wants)

Consumers(Wants)

Company(Profits)

Company(Profits)

SocietalMarketingConcept

SocietalMarketingConcept

Fast-food industry: high in fat and salt; packages lead to waste & pollutionJohnson & Johnson: supporting many community and employee programs recalled cyanide-laced Tylenol costing $240 million


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How do Consumers ObtainProducts and Services?How do Consumers ObtainProducts and Services?

• ExchangesExchanges - act of obtaining a desired object from someone by offering something, such as money, another good, or a service, in return.

• Transactions Transactions - trade of values between parties: one party gives X to another party and gets Y in return.A transaction is marketing’s unit of measurement.

• Relationship Marketing Relationship Marketing – the process of creating, maintaining, and enhancing strong, value-laden relationships with customers and other stakeholders.


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Relationship Building BlocksRelationship Building Blocks

• CustomersCustomers – refer to both end users and marketing intermediaries.

• Customer Perceived Value Customer Perceived Value - difference between the value the customer gains from owning and using a product and the cost of obtaining the product.(perceived benefits – perceived costs)

• Customer Satisfaction Customer Satisfaction - depends on the product’s perceived performance in delivering value relative to a buyer’s expectations. (perceived performance- perceived expectations)


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Customer Relationship ManagementCustomer Relationship Management

• The overall process of building and maintaining profitable customer relationships by delivering superior customer value and satisfaction.

• Customer Relationship Levels

–Basic Relationships with Low –margin customers

– Full Partnership with high-margin customers

• Customer Loyalty and Retention Programs

–Adding financial benefits: frequent flier program

–Adding financial benefits + social benefits: “Swatch: the Club”

–Adding financial benefits + social benefits + Structural Ties: FedEx


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From Database Marketing to Customer Relationship Management (CRM)From Database Marketing to Customer Relationship Management (CRM)

• Customer Relationship Management has been defined narrowly as a customer data management activity.

• Attract new customers, and create transactions with them

• Retain current customers, and build profitable, long-term relationships with current customers

• Customer profitability analysis to weed out losing customers and target winning ones.

• Connecting with customers more directly.


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Customer Relationship GroupsCustomer Relationship Groups

ButterfliesGood fit between company’s

offerings and customers’ needs;

High profit potential

True FriendsGood fit between company’s


Highest profit potential

StrangersLittle fit between company’s


Lowest profit potential

BarnaclesLimited fit between company’s


Low profit potential

Short-term Customers Long-term Customers

High- Profit

Low- Profit


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Return on Marketing Investment (ROMI)from reading: “Drive ROMI by Tying Brand Equity to Consumers”

Return on Marketing Investment (ROMI)from reading: “Drive ROMI by Tying Brand Equity to Consumers”

Financial performance

•Market share

•Profits

•Sales

Customer Purchase Behavior

•New purchase

•Re-purchase

•Segmentation

Brand Equity

•Awareness

•Attitude

•Perceived quality

•Loyalty

•Associations

Marketing Activities

•Rebate

•Ad

•Promotion

•Sponsorship

•Customer Services

•New Products

Before


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Partner Relationship MarketingPartner Relationship Marketing

• Working closely with partners in other company departments and outside the company to jointly bring greater value to customers.

• Every employee must be customer focused.

• Supply chain management

• Strategic alliances


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Modern Marketing SystemModern Marketing System

SuppliersSuppliers

End UserMarket

End UserMarket

MarketingIntermediaries

MarketingIntermediaries

CompetitorsCompetitors Company(Marketer)

Company(Marketer)

En

vir

on

me

nt E

nv

iron

me

nt


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The Marketing ProcessThe Marketing Process

•Understand the marketplace and customer needs and wants

•Design a customer Driven marketing strategy

•Construct a marketing program that delivers superior value

•Build profitable relationships and create customer delight

•Capture value from customers to create profits and customer quality


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EmergingChallengesEmerging

Challenges

NonprofitMarketing

New Marketing

Landscape &InformationTechnology

EthicalConcerns

Globalization

ChangingWorld

Economy

New Marketing ChallengesNew Marketing Challenges


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Corporate Social Responsibility (CSR)Corporate Social Responsibility (CSR)

• What corporate actions can be qualified as CSR?

• What are the motivations that motivate companies to behave as good corporate citizens?

• How to evaluate the result of CSR?

–What are the two tests of CSR?

–What are the four types of CSR?

• Do you agree with the following statements?

– “Corporate philanthropy is charity with other people’s money.”

– “Multinational companies should be responsible for their foreign workers’ benefits.”

• What is the stance/position of this article?

Ch01

Business

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