Chapter 1 – Marketing: creating & capturing customer value

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 and partners, and society itself.

Steps of the Marketing Process

1. Understand the marketplace and customer needs, wants and demands.
2. Design a customer-driven marketing strategy.
3. Construct an integrated marketing program that delivers superior value.
4. Build profitable relationships and create customer delight.
5. Capture value from customers to create profits and customer equity.

The main goal is to create value for customers and build Relationships!

Understanding the marketplace and customer needs

Needs: a state of felt deprivation
Physical – food, clothing, warmth & safety
Social – need for belonging and affection
Individual – need for knowledge and self-expression
Wants: the form human needs take, as shaped by our culture and individual personality, e.g., A
hungry person in China may want to indulge in some peking duck whereas, and American may
want to eat some KFC.
People have almost unlimited wants, but have limited resources (time + money)
Demands: human wants that are backed by buying power – these revolve around satisfaction.
Market offering: some combination of products, services, information or experiences offered to a
market to satisfy a need or want.
Market myopia: the mistake of paying more attention to the specific products a company offers
than to the benefits and experiences produced by these products.
Exchange: the act of obtaining a desired object from someone by offering them something in
return.
Transaction: a trade between two parties that involves at least two things of value, agreed-upon
conditions, and a time and place of engagement, e.g., Buying shoes at the shop (shoes for money),
conditions may include the ability to return the item if unsatisfied and the place would be the shoe
shop.
Markets: set of actual and potential buyers of a product. Elements of the market include; suppliers,
company (marketer), marketing intermediaries, consumers & competitors – whereby each party in
the system adds value for the next level.

Designing a customer - driven marketing strategy

Marketing management: the art and science of choosing target markets and building profitable
relationships with them.
 The marketing manager’s aim is to find, attract, keep and grow target customers by
creating, delivering and communication superior customer value.
 Marketing management is concerned not only with finding and increasing demand but also
with changing or even reducing it e.g. Uluru may have too many people wanting to climb
it.
 De-marketing: marketing in which the task is to temporarily or permanently reduce
demand.
 Greater emphasis has been placed on retaining existing customers via building lasting
customer relationships. The key to this is creating superior customer value and satisfaction.

Demand management ready-reckoner

Includes; negative demand, no demand, latent demand, declining demand, irregular demand, full
demand, overfull demand and unwholesome demand.

Marketing management orientations

Production concept: the notion that consumers will favor products that are available and highly
affordable, and that the organization should therefore focus on improving production and
distribution efficiency. However, this may lead to market myopia.
Product concept: the idea that consumers will favor products that offer the most quality,
performance and features, and that the organization should therefore devote its energy to making
continuous product improvements. This may also lead to market myopia.
Selling concept: the idea that consumers will not buy enough of the firm’s products unless it
undertakes a large scale selling & promotion effort.
- Usually for unsought goods i.e., Blood donations & life insurance policies.
- Not focused on building long lasting customer relationships. Less emphasis on catering to
a particular market’s needs or wants. More emphasis on selling what they have rather than
what the customer wants/needs.
Marketing concept: the marketing management philosophy which holds that achieving
organizational goals depends on knowing the needs and wants of target markets and delivering the
desired satisfactions better than competitors do.
- The marketing concept starts with a well-defined market, focuses on the customers’ needs,
and integrates all the marketing activities that affect customers. In turn, it yields profits by
creating long lasting relationships with the right customers based on customer value and
satisfaction.

Selling vs. Marketing Concepts

Societal Marketing concept: the idea that a company’s marketing decisions should consider
consumer’s wants, interests & society’s long-run interests.
- Idea that marketing strategy should either maintain or enhance consumer and society well-
being.
- Calls for sustainable marketing to preserve or enhance the ability of future generations to
meet their needs.
 :. Consider the effects that bottled water has on the environment.

Preparing an integrated marketing plan and program

(7 Ps)
Target customers intended positioning
Product: goods, services and experiences. e.g., variety, quality, design, features, brand name,
packaging, sizes, add-ons, warranties & return options.
Promotion: advertising, personal selling, direct marketing, online marketing
Price: list price, discounts, allowances and settlement, credit terms.
Placement logistics: demand chain management, logistics management, channel management.
People: People interacting with people is how many services experiences might be described.
Relationships are important in marketing.
Process: In the case of ‘high contact’ services, customers are often involved in the process of
creating and enjoying experiences. Increasingly, so is technology.
Physical evidence: Services are mostly intangible. The meaning of other tools and techniques used
in measures of satisfaction are important.

Building customer relationships

Customer relationship management: the overall process of building and maintaining profitable
customer relationships by delivering superior customer value and satisfaction. deals with all
aspects of acquiring, keeping and growing demand.
Customer-perceived value: the customer’s evaluation of the difference between all the benefits and
all the costs of a marketing offer relative to those of competing offers. eg. is buying a Toyota Prius
really that beneficial to saving the environment as well as money?
Customer satisfaction: the extent to which a product’s perceived performance matches or exceeds
a buyer’s expectations.
Smarter companies aim to delight customers not only to retain them but, for the idea that they will
‘preach’ to others, their delight experienced with the company.
However, they do no seek to maximize customer satisfaction as the relationship must be profitable.
Therefore, businesses must balance customer satisfaction but maintain profitability. In other
words, they need to continue to strive for customer value and satisfaction but not ‘give away the
house’ as such.

The changing nature of relationships

In today’s world, more emphasis has been placed on building deeper, more direct and lasting
relationships with more carefully selected customers rather than mass marketing.
The goal is to target fewer, more profitable customers.

Interactive customer relationships

New communication approaches let markets create deeper consumer involvement and a sense of
community surrounding a brand to make the brand a meaningful part of consumer’s conversations
and lives.
Customer managed relationships: marketing relationships in which customers, empowered by
technological advances, interact with companies and others to shape their relationships with
brands. Less intrusion by companies, more attraction through creating offerings and messages that
involve customers rather than interrupt them.
Consumer-generated marketing: brand exchanges created by consumers themselves - both
invited and uninvited by which consumers are playing an increasing role in shaping their own
brand experiences and those of other consumers.
Partner relationship management: working closely with partners in other company departments
and outside the company to jointly bring value to customers. e.g., supply chain management
 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 to the company. Companies realize that losing a customer is more than
losing a single sale, it means losing the entire amount of purchases that they would make over their
lifetime at the company.
Share of customer: the portion of the customer’s purchasing that a company gets in its product
categories. A good way of achieving this is by; offering a greater variety of products & training
staff to upset and cross-sell (e.g. offering software and accessories to a customer when they buy a
computer or recommending a more expensive model in relation to their needs)
Customer equity: the total combined customer lifetime values of all the company’s customers.
Different types of customers require different relationship management strategies, their ultimate
goal is to build the right relationships with the right customers.

The changing marketing landscape

Economic events such as the Global Financial Crisis have huge impacts on consumer spending.
Often economic turmoil tarnishes consumer confidence to spend lavishly due to falling wages,
falling house prices and unemployment. As such, marketing managers may need to change or alter
their approaches to particular specific markets.
Not-for-profit marketing: marketing as practiced by a variety of organizations (universities,
hospitals, private schools & museums) whose aim is to make surpluses so as to continue their
operations, but who do not seek to make profits for shareholders. Technology has introduced great
opportunity for marketers as they now have more ways of reaching people. Furthermore,
technological advances have enabled companies to expand significantly, their market coverage,
purchasing and manufacturing monitoring.
Despite the economic prosperity that globalization has brought to many countries. it has also been
a major cause of environmental problems such as climate change and global warming. e.g., China
& smog.

So, what is marketing? Putting it all together

A company focuses on creating value and satisfaction for the consumers of their respective
markets. They know that they cannot serve all customers in the way (i.e. profitable vs. less
profitable). Thus, they need to balance their resources and focus on the customers that they can
serve best and most profitably.
The marketing manager outlines value propositions that spells out what values the company will
deliver in order to win the target market. Marketers focus on building lasting profitable
relationships with customers and make it their goal to satisfy and delight them in order to retain
their business and be a part of their conversations. The company reaps the benefits (customer
equity) from the relationships and satisfaction that its products or services provide. Focus on
technological advances, globalization & partnerships.