Marketing Creating and Capturing Customer Value Chapter 1

Marketing Creating and Capturing Customer Value Chapter 1

Rest Stop: Previewing the Concepts 1. 2. 3. 4. 5. Define marketing and the marketing process. Explain the importance of understanding customers and identify the five core marketplace concepts. Identify the elements of a customer-driven marketing strategy and discuss the marketing management orientations that guide strategy. Discuss customer relationship management and identify strategies for creating value for and capturing value from customers. Describe the major trends and forces that are changing the marketing landscape. Copyright 2011, Pearson Education Inc. Publishing as Prentice. Hall 1 -2

First Stop Zappos Creates Customer Value & Relationships Creating Customer Value • • • Goal: Provide the very best customer service & customer experience. Customer-centric approach: Free delivery, free returns, 365 day return policy & service upgrades. Results: 75% of sales come from current customers, tremendous sales growth despite poor economy, 10 million customers served annually. Copyright 2011, Pearson Education Inc. Publishing as Prentice. Hall • • • Building Relationships Service Culture: Built around 10 core principles; every new hire takes 4 weeks of customer loyalty training. Commitment: During training, employees are offered $2000 to quit; only 1% do so. Lifelong relationships are the goal: Employees comparison shop other Web sites; social networking is used for direct contact with customers; customer feedback and criticism is strongly encouraged and valued. 1 -3

What Is Marketing? Simple definition: Marketing is managing profitable customer relationships. Therefore: Marketing is satisfying the wants and needs of customers, at a profit. Goals: 1. Attract new customers by promising superior value. 2. Keep and grow current customer-base by delivering satisfaction. Copyright 2011, Pearson Education Inc. Publishing as Prentice. Hall 1 -4

Marketing Defined • Marketing is the process by which companies create value for customers and build strong customer relationships in order to capture value from customers in return. OLD view of marketing: NEW view of marketing: Making a sale “telling and selling” Satisfying customer needs Copyright 2011, Pearson Education Inc. Publishing as Prentice. Hall 1 -5

The 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 equity. Copyright 2011, Pearson Education Inc. Publishing as Prentice. Hall 1 -6

Core Concepts • Marketers must understand five core customer and marketplace concepts: Needs, wants, and demands Market offerings Value and satisfaction Exchanges and relationships Markets Copyright 2011, Pearson Education Inc. Publishing as Prentice. Hall 1 -7

Needs, Wants, and Demands • Need: State of felt deprivation including physical, social, and individual needs. Physical, • Wants: social, and individual needs Form that a human need takes, as shaped by culture and individual personality. • Wants + Buying Power = Demand Copyright 2011, Pearson Education Inc. Publishing as Prentice. Hall 1 -8

Marketing Offerings • Needs and wants are fulfilled through a Marketing Offer: Some combination of products, services, information, or experiences offered to a market to satisfy a need or want. Copyright 2011, Pearson Education Inc. Publishing as Prentice. Hall 1 -9

Market Offerings • Products: Persons, places, organizations, information, and ideas. • Services: Activity or benefit offered for sale that is essentially intangible and does not result in ownership. • Brand experiences: Should immerse the consumer in the brand experience and may be intensely personal. Copyright 2011, Pearson Education Inc. Publishing as Prentice. Hall 1 - 10

Marketing Myopia • Marketing myopia: Occurs when sellers pay more attention to the specific products they offer than to the benefits and experiences produced by the products. They focus on the “wants” and lose sight of the “needs. ” Copyright 2011, Pearson Education Inc. Publishing as Prentice. Hall 1 - 11

Customer Value and Satisfaction • Care must be taken when setting expectations for market offerings: If performance is lower than expectations, satisfaction is low. If performance is higher than expectations, satisfaction is high. Copyright 2011, Pearson Education Inc. Publishing as Prentice. Hall 1 - 12

Exchanges and Relationships • Exchange: Act of obtaining a desired object from someone by offering something in return. • Relationships: Marketing actions build and maintain relationships with target audiences involving an idea, product, service, or other object. Value builds relationships. Copyright 2011, Pearson Education Inc. Publishing as Prentice. Hall 1 - 13

What Is a Market? • A market: Is the set of actual and potential buyers of a product. • These people share a need or want that can be satisfied through exchange relationships. Copyright 2011, Pearson Education Inc. Publishing as Prentice. Hall 1 - 14

Modern Marketing Systems • Main elements in a modern marketing system include: Suppliers Company (marketer) Competitors Marketing intermediaries Consumers • Major environmental forces affect each element. Copyright 2011, Pearson Education Inc. Publishing as Prentice. Hall 1 - 15

Marketing Management • The art and science of choosing target markets and building profitable relationships with them. Aim is to find, attract, keep, and grow customers by creating, delivering, and communicating superior value. Copyright 2011, Pearson Education Inc. Publishing as Prentice. Hall 1 - 16

Marketing Management • Designing a winning marketing strategy requires answers to the following questions: 1. What customers will we serve? — What is our target market? 2. How can we best serve these customers? — What is our value proposition? Copyright 2011, Pearson Education Inc. Publishing as Prentice. Hall 1 - 17

Selecting Customers to Serve • Market segmentation: Dividing the market into segments of customers. • Target marketing: Selecting one or more segments to cultivate. Copyright 2011, Pearson Education Inc. Publishing as Prentice. Hall 1 - 18

Choosing a Value Proposition • The set of benefits or values a company promises to deliver to consumers to satisfy their needs. Value propositions dictate how firms will differentiate and position their brands in the marketplace. Copyright 2011, Pearson Education Inc. Publishing as Prentice. Hall 1 - 19

Marketing Management Orientations • Organizations design and carry out their marketing strategies under five alternate concepts: Production Concept Product Concept Selling Concept Marketing Concept Societal Marketing Concept Copyright 2011, Pearson Education Inc. Publishing as Prentice. Hall 1 - 20

The Marketing Concept • The marketing concept: A marketing management philosophy that holds that achieving organizational goals depends on knowing the needs and wants of target markets and delivering the desired satisfaction better than competitors. Copyright 2011, Pearson Education Inc. Publishing as Prentice. Hall 1 - 21

The Societal Marketing Concept • The societal marketing concept: The idea that a company’s marketing decisions should consider consumers’ wants, the company’s desires, consumers’ long-run interests, and society’s long-run interests. Copyright 2011, Pearson Education Inc. Publishing as Prentice. Hall 1 - 22

The Integrated Marketing Plan • Transforms the marketing strategy into action. • Includes the marketing mix and 4 Ps of marketing: Product Price Place (Distribution) Promotion Copyright 2011, Pearson Education Inc. Publishing as Prentice. Hall 1 - 23

Building Customer Relationships • Customer relationship management: The overall process of building and maintaining profitable customer relationships by delivering superior customer value and satisfaction. • CRM deals with all aspects of acquiring, keeping, and growing customers. • Customer value and satisfaction are key. Copyright 2011, Pearson Education Inc. Publishing as Prentice. Hall 1 - 24

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. • Perceptions may be subjective • To some customers “value” might mean paying more to get more. Copyright 2011, Pearson Education Inc. Publishing as Prentice. Hall 1 - 25

Customer Satisfaction • Customer satisfaction: Extent to which the product’s perceived performance matches a buyer’s expectations. • High levels of customer satisfaction often leads to consumer loyalty. • Some firms seek to DELIGHT customers by exceeding expectations. • Profitability must be considered. Copyright 2011, Pearson Education Inc. Publishing as Prentice. Hall 1 - 26

Customer Relationships • Firms may choose to build relationships at different levels. • Loyalty and retention programs build relationships and may include: Frequency marketing programs Club marketing programs Copyright 2011, Pearson Education Inc. Publishing as Prentice. Hall 1 - 27

Changing Nature of Relationships • Customer profitability analysis eliminates losing • • • customers and selects profitable ones with whom relationships should be developed. Firms related more deeply and interactively via blogs, social network Web sites, e-mail, and video sharing. Embracing customer-managed relationships requires marketing via attraction rather than intrusion. Consumer-generated marketing has become a significant marketing force. Copyright 2011, Pearson Education Inc. Publishing as Prentice. Hall 1 - 28

Partner Relationship Marketing • Marketing partners help create customer value and assist in building customer relationships. • Partners inside the firm: Cross-functional customer teams • Partners outside the firm: Supply chain management Copyright 2011, Pearson Education Inc. Publishing as Prentice. Hall 1 - 29

Capturing Value From Customers • Value is captured from customers via current and future sales, market share, and profit. Superior customer value leads to highly satisfied loyal customers who buy more. Key outcomes of customer value include customer loyalty and retention, share of market, share of customer, and customer equity. Copyright 2011, Pearson Education Inc. Publishing as Prentice. Hall 1 - 30

Customer Equity • The total combined customer lifetime values of all the company’s current and potential customers. • Manage equity by: Classifying customers by projected loyalty and potential profitability. Manage each group accordingly. Copyright 2011, Pearson Education Inc. Publishing as Prentice. Hall 1 - 31

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. • Share of customer The portion of the customer’s purchasing that a company gets in their product categories. Copyright 2011, Pearson Education Inc. Publishing as Prentice. Hall 1 - 32

Changing Marketing Landscape • The uncertain economic environment • The digital age • Rapid globalization • Sustainable marketing – call for more social responsibility • Growth of not-for-profit marketing Copyright 2011, Pearson Education Inc. Publishing as Prentice. Hall 1 - 33

Rest Stop: Reviewing the Concepts 1. 2. 3. 4. 5. Define marketing and the marketing process. Explain the importance of understanding customers and identify the five core marketplace concepts. Identify the elements of a customer-driven marketing strategy and discuss the marketing management orientations that guide strategy. Discuss customer relationship management and identify strategies for creating value for and capturing value from customers. Describe the major trends and forces that are changing the marketing landscape. Copyright 2011, Pearson Education Inc. Publishing as Prentice. Hall 1 - 34

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 © 2011 Pearson Education, Inc. Publishing as Prentice Hall Copyright 2011, Pearson Education Inc. Publishing as Prentice. Hall 1 - 35