CREATING

CUSTOMER VALUE AND

ENGAGEMENT
What Is Marketing?

Simple definition:
Marketing is the management process responsible for
identifying, anticipating, and satisfying customer
requirements profitably.” (CIM,2001)

Goals:
1. Attract new customers by promising superior value.
2. Keep and grow current customers by delivering
satisfaction.
Marketing Defined

 Marketing is the activity, set of instructions,

and processes for creating, communicating,
delivering, and exchanging offerings that have
value for customers, clients, partners, and
society at large.

OLD view of NEW view of

marketing: marketing:
Making a sale Satisfying
—“telling and customer needs
selling”
What is Marketing?

Marketing is an organizational function

and a set of processes for creating,
communicating, and delivering value
to customers and for managing
customer relationships
in ways that benefit the
organization and its stakeholders.
(American Marketing Association Formal Definition)
 “Marketing is the social process by which
individuals and organizations obtain what they
need and want through creating and exchanging
value with others.”

-Kotler and Armstrong (2010)-

 “Marketing is the management process for
identifying, anticipating and satisfying customer
requirements profitably.”
-The Chartered Institute of Marketing
(CIM) 2012 -
 “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.”
American Marketing Association (2012).
Marketing Management is..
“Marketing Management is the process of
planning and executing the
conception, pricing, promotion, and
distribution of ideas, goods and
services to create exchanges that
satisfy individual and organisational
goals”

8
American Marketing Association
What is Marketing Management?

Marketing management is the

art and science
of choosing target markets
and getting, keeping, and growing
customers through
creating, delivering, and communicating
superior customer value.
Why is Marketing Important?
Shifting Business Paradigms

Buyers’ markets

Sellers’ markets
 Functions/Tasks of Marketing
Marketers act as the customers’ voice within the firm
and marketers are responsible for many more
decisions than just advertising or sales:
 Analyse industries to identify emerging trends/
Assessing opportunities.
 Determine which national and international
markets to enter or exit/ Identifying markets to
enter.
 Conduct research to understand consumer
behavior.
 Design integrated marketing mixes – products,
prices, channels of distribution, and promotion
programs. 11
A Simple Marketing System
 Main actors and forces in a
Modern marketing system

Competitor
s

Marketing
Suppliers intermediarie End user
s market

Company
(marketer)

13
Marketing Process

A simple model of the marketing process:

 Understand the marketplace and customer
needs and wants.
 Design a customer-driven marketing strategy.
 Construct an integrated marketing program
that delivers superior value.
 Build profitable relationships and create
customer delight.
 Capture value from customers to create profits
and customer quality.
Scope of Marketing

□ Places: India , Goa, Malaysia

Properties: real estate, farm houses, etc
Organizations: hospitals, educational institutes, etc
Goods: pen car, etc
Services: doctors, CAs, Teachers
Experiences: Theme parks, amusement parks, movies.
Information: Google, wiki, etc
Ideas: Interior decorator, etc
Events: New years party, award shows.
Persons: actors, sportsmen, politicians, etc.
15
Understanding Marketing definition

To explain marketing definition, we examine

the following important terms :
 Needs, wants, and demands
 Products and services
 Value, satisfaction and quality
 Exchange, transactions, and relationships
 Markets

16
Products and Services
Product:
 Anything that can be offered to a market to satisfy a
need or want.
 The concept of product is not limited to physical
objects – anything capable of satisfying a need can be
called a product.
 However, these are largely tangible, material offerings .

Services:
 In addition to tangible goods, products also include
services, which are activities or benefits offered for sale
that are essentially intangible and do not result in the
ownership of anything.
 These cannot be touched and stored.
17
Exchange, Transactions, and
Relationships
Exchange :
 The act of obtaining a desired object from
someone by offering something in return
Transaction :
 A trade between two parties that involves at
least two things of value, agreed – upon
conditions a time of agreement, and a place of
agreement.
Relationship marketing :
 The process of creating, maintaining, and
enhancing strong, value – laden relationships 18
with customers and other stakeholders
MARKETING MANAGEMENT PHILOSOPHIES

 The role that marketing plays within a company

varies according to the overall strategy and
philosophy of each firm.
 There are five alternative concepts under
which organizations conduct their marketing
activities:
 Production concept
 Product concept
 Selling concept
 Marketing concept
 Societal marketing concepts
19
Company Orientations Towards Marketing
 Production Concept

Concentrate on achieving high production

efficiency, low costs, and mass distribution

Assume that consumers are primarily

interested in product availability and low
prices

Focus on improving production and distribution

efficiency.
 Product Concept
Assume that buyers admire well-made products
and can appraise quality and performance.

Managers are sometimes caught up in a love

affair with their product and do not realize what
the market needs

 Focus on making continuous product

improvements.
Selling Concept

- consumers will not buy enough

of the organization’s products
unless the organization
undertakes a large – scale
selling and promotion effort.
- Focus on creating sales
transactions.

23
Marketing Concept

Achieving organizational goals depends on

knowing the needs and wants of target markets
and delivering the desired satisfactions better
than competitors do.

 Focus on a “customer first” approach.

Marketing Concept
• consists of the company being more effective than competitors in
creating, delivering, and communicating customer value to its
selected target customers
• The marketing concept rests on four pillars:
+ target market
+ customer needs
+ integrated marketing
+ profitability
 Marketing Concept

-increasing a company’s ability to

compete and achieve maximum
profits by marketing the ways in
which it offers better value to
customers than its competitors.

- about:
+ knowing the target market,
+ sensing its needs, and
+ meeting them most effectively.
Societal Marketing Concept

- should determine the needs, wants,

and interests of target markets and
deliver the desired satisfactions
more effectively and efficiently
than competitors in a way that
maintains or improves the
consumer’s and society’s well –
being.
27
 Societal Marketing Concept
- deliver value to customers in a way that
maintains or improves both the consumer’s
and society’s well-being.
- focus on making continuous product
improvements.
- determine the needs, wants, and
interests of target markets and to deliver
the desired satisfactions
- preserve or enhance the consumer’s
and the society’s well-being.
 Three Considerations Underlying The
Societal Marketing
Society
(Human welfare)
 Less toxic products
 More durable products
 Products with reusable
or recyclable materials
Societal
marketing
concept

Consumers Company
(Want satisfaction) (Profits)

29
 Societal Marketing
Concept
- emphasize the welfare of society.

- marketers have a moral responsibility

to market conscientiously to promote
what’s good for people over what people
may want, regardless of a company’s
sales goals.

- Employees of a company live in the

societies they market to, and they should
advertise with the best interests of their
local community in mind.
 Selling Marketing

Related to Constraining Leading commodities

customer’s perception and services towards
of commodities and the consumer’s
services perception.
Beginning point Factory Marketplace
Concentrates on Product Consumer needs
Orientation Volume Profit
Cost Price Cost of Production Market ascertained
Business Planning Short term Long term
Differences between marketing and
selling

Marketing Selling
Factory Market
Existing product Customer needs
Selling and promotion Integrated marketing
Profit from through Profits through
sells volume customers’ satisfaction
Selling vs Marketing

Productio Product
n concept Concept
 Marketing Myopia
 First introduced -Theodore Levitt
 Narrow minded approach: Here the marketer
wants to sell the product and services, without
much focusing on the customer demands/needs
 Also known as marketing short sightedness. It is
a type of distorted vision about the
organisation .
 Focus on product rather than customer
 Mass production

34
Review: Marketing Management Philosophies

Orientation Focus

Production What can we make or do best?

Sales
Sales How can we sell more aggressively?

What do customers
Marketing
Marketing want and need?
What do customers want and need, and how
Societal
Societal can we benefit society?
Marketing Process
 A marketing process include all the steps and activities in the that a
marketing department administers to reach its objectives.
 The marketing process include the following activities:-
1. Analyzing marketing opportunities and developing the organization’s
mission and objectives.
Can be done by SWOT analysis (strengths, weaknesses, opportunities,
threats).
2. Selecting target markets.
3. Developing the marketing strategy by developing marketing mix (4 P’s).
 Product , Price, Promotion, and Place.
4. Managing the marketing effort.
 Include analysis, planning, implementation, and control.
The Marketing Mix
4P’s Marketing mix
The physical People are
environment People fundamental
in which a Physical
in delivering
service takes Evidence any product or
place. service.

Process

Processes are all the

mechanism, planning
and decision making
 4C’s Marketing mix

“In the 1990s, the four Ps were adapted to the four Cs

to place less focus on the business and more on the
customer. .”
-Robert Lauterborn-
 Marketing mix

PRODUCT PRICE PLACE PROMOTION

Product Price Place Promotion
Variety List price Channels Advertising
Quality Discounts Coverage Sales force
Design Allowances Locations Public
Features Payment Inventory relations
Brand name periods Transport Direct
Packaging Credit terms marketing
Services

42
 Recognize 4Ps and the 7Ps->
&C
 Product customer value
 Price cost
 Place convenience
 Promotioncommunication
 People consideration
 Processes co-ordination
 Physical evidence confirmation
43
NEEDS

Needs are things that satisfy the

basic requirement, which are
essential for human beings to
survive.
For example: shelter, clothes, food, water, etc
Physical needs include the basic
human requirements such as air
for breathing, food, water,
clothing, and shelter.

Social needs are the requirement

for belongings and affection from
friends and family.

Individual needs can be varied

depending on each person’s
perception, knowledge, and
environment.
 NEEDS
basic human requirements like shelter, clothes, food, water,
etc. essential for human beings to survive.

other needs are education, healthcare or even a social thing,

for example, belonging to a certain society or self-expression
NEEDS WANTS DEMANDS
states of felt Being shaped by Being backed by an
deprivation culture and ability &
individual willingness to
personality buy them.

Maslow’s
Hierarchy of Needs
 Stated Needs • I want a car

• I want a car for going to work with

Real needs low operating costs

• I want good after-sale service from

Unstated Needs the dealer

Delight needs • I want the dealer to include some gifts

with the car

• I want a car for the status symbol

Secret Needs
 WANTS
- Wants are directed by our surrounding towards reaching certain needs.
Therefore human’s wants can be varied depending on each individual’s
perception, environment, culture, and society.
Example: needs food; but may want a hamburger, fried potato and beer or a
bowl of noodle and a cup of hot tea.

- In reality, marketers do not create needs. Human’s needs exist before the
existing of marketers. Marketers might promote some specific objects, and
make people want those objects for their needs.

- criticisms that “marketing creates unnecessary needs, wants, and demands.”,

“marketers get people to buy things that they don’t want.” , etc.
WANTS

• Wants are desires for specific

satisfiers of needs.
• Human’s wants can be varied
depending on each individual’s
perception, environment, culture,
and society.

For example: A Vietnamese needs food but he

may want broken rice or Pho, while an
American may want Burger or Sandwich
DEMANDS
Needs or Wants turn to be Demands when
a customer is willing and having the ability
to buy that needs or wants.

Willingness and ability to buy Wants and

Needs

For example: Willingness to buy BMW is a want but if

you have the buying power then it becomes a
demand.
 Needs, Wants, and Demands
Needs:
 states of felt deprivation.
 Human have many complex needs:
 Physical needs for food, clothing, warmth, and safety
 Social needs or belonging and affection
 Individual needs for knowledge and self – expression

Wants:
 form taken by human needs as they are shaped by culture
and individual personality. They are specific.
 almost unlimited wants but limited resources.
Demands:
 Wants for specific products that are backed by an ability &
willingness to buy them. 52

 Wants become demand when supported by purchasing

Demand States
• Negative Demand • Irregular Demand
• Consumers dislike the • Consumers purchases vary on a
product e.g. Vaccination, Dental work seasonal, monthly, weekly, daily
• Nonexistent Demand or hourly e.g. Museums on week days,
Travelling Peak Off Peak time
• Consumers may be unaware
of the product e.g. Foreign Language • Unwholesome Demand
course • Consumers attracted to
• Latent Demand products that have undesirable
social consequences e.g. Cigarettes,
• Consumers may share a Alcohol, Drugs
strong need that can’t be
satisfied with existing product • Full Demand
e.g. Harm less cigarettes, Fuel Efficient cars • Consumers are adequately
• Declining Demand buying all products.
• Consumers begins to buy the • Overfull Demand
product less frequently e.g. • More consumers would like to
churches, Govt. Schools
buy than can be satisfied.
 Customer value
The value the individual
consumer places on a product
or service becomes the
customer value for that
offering.
What is Customer Value?
Customer value is the perception of what a
product or service is worth to a customer
versus the possible alternatives.
What the Customer pays is not only price
but also non-price terms
* Benefits: advantages/quality of the
product, service, image and brand of the
company/product, values, experience,
success one gets in using the product and
so on.
Customer value is benefits – cost
(CV = B – C)
Customer Perceived Value

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.” (Armstrong & Kotler)
– Perceptions may be subjective
– Consumers often do not objectively judge values
and costs.
Customer value = perceived benefits – perceived
sacrifice.
 Customer lifetime value (CLV) is a
measure of the total income a
business can expect to bring in
from a typical customer for as long
as that person or account remains a
client.
CUSTOMER total revenue a customer will
LIFETIME VALUE generate for a business
throughout the relationship.

CLV = Average Transaction Size x Number of Transactions x Retention Period

Estimating Lifetime Value
 Annual customer revenue: $500
 Average number of loyal years: 20
 Company profit margin: 10
 Customer lifetime value: $1000
EXAMPLE A local coffee chain with three locations
has an average sale of $4. The typical
customer is a local worker who visits
two times per week, 50 weeks per
year, over an average of five years.

CLV = $4 (average sale) x 100 (annual visits) x 5 (years) =

$2,000
EXAMPLE
Assume someone buys a new car every five
years for $30,000. Customers are loyal to
this brand and tend to keep buying from it for
15 years.

CLV = $30,000 (average sale) x 1/5 (annual purchases) x 15

(years) = $90,000
 Customer lifetime value

Once a month

$17 per time

10 years $ 17 x 12 x 10 = $ 2.040.
Maximizing Customer Lifetime
Value
● Customer profitability: 20-80 rule
● Customer equity :the total asset value of the relationships
which an organization has with its customers.
● Customer equity is based on customer lifetime value, and an
understanding of customer equity can be used to optimize
the balance of investment in the acquisition and retention of
customers. It is also known as customer capital and forms
one component of the intellectual capital of an organization.
 Customer equity
sum of customer lifetime values
for every customer of a particular
brand.
 Customer Satisfaction
how happy or
unhappy are the
customer with the
products or
services.
 Customer Value and Satisfaction

Dependent on the product’s perceived

performance relative to a buyer’s expectations.
Care must be taken when setting expectations:
 If performance is lower than expectations, satisfaction
is low.
 If performance is higher than expectations, satisfaction
is high.
Customer satisfaction often leads to consumer loyalty.
Some firms seek to DELIGHT customers by exceeding
expectations.
 Values, Satisfaction, and Quality
Values:
 Customer value is the difference between the values
the customer gains from owning and using a product and
the costs of obtaining the products.
 Payment- received

Satisfaction:
 Customer satisfaction depends on a product’s perceived
performance in delivering value relative to a buyer’s
expectation.
 If the product’s performance falls short of the
customer’s expectations, the buyer is dissatisfied.
Quality:
 Customer satisfaction is closely linked to quality.
 Quality has a direct impact on product performance.67

 Quality can be defined as “freedom from defects”.

 Holistic Marketing Concept

 Relationship Marketing: building long-term satisfying

relations with key parties – customers, suppliers,
distributors – in order to retain their long-term preference
& business.
 designed to foster customer loyalty, interaction and long-
term engagement.
 Integrated Marketing Communication (IMC): planning,
executing and monitoring the brand messages that create
customer relationship.
 Internal Marketing: task of hiring, training, and
motivating able employees who want to serve customers
well.