THE MARKETING

PROCESS:
CREATING & CAPTURING CUSTOMER
VALUE
 The Marketing Process
• Marketing is the process by which companies create value for customers
and build strong customers relationships in order to capture value from
customers in return.
• The Marketing Process five-step model for creating and capturing customer
value.
• 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.
• By creating value for consumers, they in turn capture value from consumers in
the form of sales, profits, and long-term customer equity
The Marketing Process
 1. Understanding the Market
Place and Consumer Needs
• As a first step, marketers need to understand customer needs
and wants and the marketplace in which they operate.
• We examine five core customer and marketplace concepts:
(1) Needs, wants, and demands;
(2) Market offerings (products, services, and experiences);
(3) Value and satisfaction;
(4) Exchanges and relationships; and
(5) Markets.
 Customer Needs, Wants and
Demands
• The most basic concept underlying marketing is that of satisfying human
needs.
• Needs are basic requirements for human survival and well-being, such as
food, shelter, clothing, and healthcare.
• In marketing, needs are the gaps which companies try to fulfil with their
products and services.
• Wants are desires that go beyond basic necessities. They are shaped by
knowledge, culture, personality, marketing, and preferences.
• Examples of wants include luxuries like designer clothes, fancy cars,
vacations, and a house in a good neighbourhood.
 Customer Needs, Wants and
Demands
• Demand is an economic concept of consumers’ desire and willingness
to buy goods and services at different prices.
• People demand products and services with benefits that add up to the
most value and satisfaction.
• Companies go to great lengths to learn about and understand customer
needs, wants, and demands.
• They conduct consumer research, analyse mountains of customer data,
and observe customers as they shop and interact, offline and online.
People at all levels of the company— including top management—stay
close to customers:
 Market Offerings-Products,
Services and Experiences
• Consumers’ needs and wants are fulfilled through market offerings.
Market offerings are a combination of products, services, information,
or experiences offered to a market to satisfy a need or a want.
• Market offerings are not limited to physical products. They also include
services—activities or benefits offered for sale that are essentially
intangible and do not result in the ownership of anything.
• Examples include banking, airline, hotel, retailing, and home repair
services.
• Market offerings also include other entities, such as persons, places,
organizations, information, and ideas.
 Market Offerings-Products,
Services and Experiences
• Many sellers make the mistake of paying more attention to the specific products they offer
than to the benefits and experiences produced by these products.
• These sellers suffer from marketing myopia (The mistake of paying more attention to
the specific products a company offers than to the benefits and experiences
produced by these products).
• They are so taken with their products that they focus only on existing wants and lose sight of
underlying customer needs.
• For example, Nokia once a leader in the mobile phone market, underestimated the
importance of smartphones and the shift towards touch-screen technology. This allowed
competitors like Apple and Samsung to take over the market.
• Despite inventing the digital camera, Kodak focused too much on its film business and failed
to capitalize on the digital photography revolution. This oversight led to a significant decline
in their market share.
Customer Value and Satisfaction
• Consumers usually face a broad array of products and services that might satisfy a
given need. How do they choose among these many market offerings?
• Customers form expectations about the value and satisfaction that various market
offerings will deliver and buy accordingly.
• Satisfied customers buy again and tell others about their good experiences.
• Dissatisfied customers often switch to competitors and disparage the product to others.
• Marketers must be careful to set the right level of expectations. If they set expectations
too low, they may satisfy those who buy but fail to attract enough buyers. If they set
expectations too high, buyers will be disappointed.
• Customer value and customer satisfaction are key building blocks for developing and
managing customer relationships.
 Exchange and Relationships
• Marketing occurs when people decide to satisfy their needs and wants through
exchange relationships.
• Exchange is the act of obtaining a desired object from someone by offering something
in return.
• The marketer tries to bring about a response to some market offering. The response
may be more than simply buying or trading products and services. A political
candidate, for instance, wants votes; a church wants membership and participation; an
orchestra wants an audience; and a social action group wants idea acceptance.
• Marketing consists of actions taken to create, maintain, and grow desirable exchange
relationships with target audiences involving a product, service, idea, or other object.
Companies want to build strong relationships by consistently delivering superior
customer value.
 Markets
• A market is the set of actual and potential buyers of a product or service.
• These buyers share a particular need or want that can be satisfied
through exchange relationships.
• Marketing means managing markets to bring about profitable customer
relationships.
• And this involves activities such as searching for and engage buyers,
identify their needs, design good market offerings, set prices for them,
promote them, and store and deliver them. Activities such as consumer
research, product development, communication, distribution, pricing, and
service are core marketing activities.
 2. Designing A Customer Value –
Driven Marketing Strategy and Plan
• Once it fully understands consumers and the marketplace, marketing
management can design a customer value–driven marketing strategy.
• We define marketing management as the art and science of choosing target
markets and building profitable relationships with them.
• The marketing manager’s aim is to engage, keep, and grow target customers
by creating, delivering, and communicating superior customer value.
• To design a winning marketing strategy, the marketing manager must answer
two important questions:
(1) What customers will we serve (what’s our target market)? and
(2) How can we serve these customers best (what’s our value proposition)?
 Selecting Customers to Serve
• The company must first decide whom it will serve.
• It does this by dividing the market into segments of customers (market
segmentation) and selecting which segments it will go after (target marketing).
• Marketing management is not about finding as many customers as possible and
increasing demand. But marketers know that they cannot serve all customers in
every way. By trying to serve all customers, they may not serve any customers well.
• Instead, the company wants to select only customers that it can serve well and
profitably. Ultimately, marketing managers must decide which customers they want
to target and on the level, timing, and nature of their demand.
• Simply put, marketing management is customer management and demand
management.
 Choosing A Value Proposition
• The company must also decide how it will serve targeted customers—how it will
differentiate and position itself in the marketplace.
• A brand’s value proposition is the set of benefits or values it promises to deliver to
consumers to satisfy their needs.
• Coca Cola’s slogan is “Taste the feeling” which emphasises the emotional connection
people have with the Coca Cola brand. Pepsi’s brand promise is to “Create more smiles
with every sip and every bite’’
• Such value propositions differentiate one brand from another.
• They answer the customer’s question: “Why should I buy your brand rather than a
competitor’s?”
• Companies must design strong value propositions that give them the greatest advantage
in their target markets.
Designing A Marketing Strategy
• Marketing management wants to design strategies that will
engage target customers and build profitable relationships with
them.
• But what philosophy should guide these marketing strategies?
What weight should be given to the interests of customers, the
organization, and society? Very often, these interests conflict.
• There are five alternative concepts under which organizations
design and carry out their marketing strategies: the production,
product, selling, marketing, and societal marketing concepts
 3. Preparing An Integrated
Marketing Plan and Program
• The company’s marketing strategy outlines which customers it will serve and how it will create
value for these customers.
• Next, the marketer develops an integrated marketing program that will actually deliver the
intended value to target customers. The marketing program builds customer relationships by
transforming the marketing strategy into action. It consists of the firm’s marketing mix, the set of
marketing tools the firm uses to implement its marketing strategy. The major marketing mix tools
are classified into four broad groups, called the four Ps of marketing: product, price, place, and
promotion.
• To deliver on its value proposition, the firm must first create a need-satisfying market offering
(product). It must then decide how much it will charge for the offering (price) and how it will
make the offering available to target consumers (place). Finally, it must engage target consumers,
communicate about the offering, and persuade consumers of the offer’s merits (promotion).
• The firm must blend each marketing mix tool into a comprehensive integrated marketing program
that communicates and delivers the intended value to chosen customers.
4. Managing Customer Relationships
and Capturing Customer Value
• Customer relationship management is the most important concept of
modern marketing.
• Customer relationship management is the overall process of building and
maintaining profitable customer relationships by delivering superior
customer value and satisfaction.
• It deals with all aspects of acquiring, engaging, and growing customers.
• The key to building lasting customer relationships is to create superior
customer value and satisfaction.
• Satisfied customers are more likely to be loyal customers and give the
company a larger share of their business.
 Customer Value
• Customers often face a wide rage of products and services from
which to choose. A customer buys from the firm that offers the
highest customer-perceived value—the customer’s evaluation of
the difference between all the benefits and all the costs of a
market offering relative to those of competing offers. Importantly,
customers often do not judge values and costs “accurately” or
“objectively.” They act on perceived value.
• To some consumers, value might mean sensible products at
affordable prices. To other consumers, however, value might mean
paying more to get more.
 Customer Satisfaction
• Customer satisfaction depends on the product’s perceived performance relative to a buyer’s expectations.
• If the product’s performance falls short of expectations, the customer is dissatisfied. If performance matches
expectations, the customer is satisfied. If performance exceeds expectations, the customer is highly satisfied or
delighted.
• Outstanding marketing companies go out of their way to keep important customers satisfied. Most studies show
that higher levels of customer satisfaction lead to greater customer loyalty, which in turn results in better company
performance.
• Companies aim to delight customers by promising only what they can deliver and then delivering more than they
promise.
•
• Delighted customers not only make repeat purchases but also become willing marketing partners and “customer
evangelists” who spread the word about their good experiences to others.

• For companies interested in delighting customers, exceptional value and service become part of the overall
company culture.
 Customer Relationship Levels
and Tools
• Companies can build customer relationships at many levels, depending on the nature of the target
market.
• At one extreme, a company with many low-margin customers may seek to develop basic relationships
with them. They create engagement and relationships through product experiences, brand-building
advertising, websites, and social media.
• At the other extreme, in markets with few customers and high margins, sellers want to create full
partnerships with key customers.
• Marketers can use specific marketing tools to develop stronger bonds with customers. For example,
many companies offer frequency marketing programs that reward customers who buy frequently or in
large amounts.
• Airlines offer frequent-flier programs, hotels give room upgrades to frequent guests, and supermarkets
give patronage discounts to “very important customers.”
• These days almost every brand has a loyalty rewards program. Such programs can enhance and
strengthen a customer’s brand experience.
 5. Capturing Value From
Customers
• The outcomes of creating customer value:
(1) Customer loyalty and retention,
(2) Share of market and share of customer, and
(3) Customer equity.
 Creating Customer Loyalty and
Retention
• Good customer relationship management creates customer satisfaction. In turn, satisfied
customers remain loyal and talk favourably to others about the company and its products.
• Studies show big differences in the loyalty between satisfied and dissatisfied customers. Even
slight dissatisfaction can create an enormous drop in loyalty. Thus, the aim of customer
relationship management is to create not only customer satisfaction but also customer
delight.
• Keeping customers loyal makes good economic sense. Loyal customers spend more and stay
around longer.
• Research also shows that it’s five times cheaper to keep an old customer than acquire a new
one.
• Conversely, customer defections can be costly. 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.
 Share of Market and Share of
customers
• Beyond simply retaining good customers to capture customer lifetime
value, good customer relationship management can help marketers
increase their share of customer—the share they get of the customer’s
purchasing in their product categories.
• To increase share of customer, firms can offer greater variety to
current customers. Or they can create programs to cross-sell and up-
sell to market more products and services to existing customers.
• For example, promotions like munchy Mondays by chicken inn and
terrific Tuesdays and Thursdays by Pizza Inn help to increase
customers.
 Customer Equity
• The value of a company comes from the value of its current and future customers.
Customer relationship management takes a long-term view.
• Companies want to not only create profitable customers but also “own” them for life,
earn a greater share of their purchases, and capture their customer lifetime value.
• Customer equity is the total combined customer lifetime values of all of the
company’s current and potential customers. As such, it’s a measure of the future
value of the company’s customer base. Clearly, the more loyal the firm’s profitable
customers, the higher its customer equity.
• Customer equity may be a better measure of a firm’s performance than current sales
or market share. Whereas sales and market share reflect the past, customer equity
suggests the future.