Principles of Marketing Creating and Capturing Customer Value

Principles of Marketing: Creating and Capturing Customer Value

Chapter Concepts 1. 2. 3. 4. 5. 6. 7. What Is Marketing? Understanding the Marketplace and Customer Needs Designing a Customer-Driven Marketing Strategy Preparing an Integrated Marketing Plan and Program Building Customer Relationships Capturing Value from Customers The New Marketing Landscape 1 -3

What Is Marketing? Marketing Defined Marketing is the process by which companies create value for customers and build strong customer relationships to capture value from customers in return Sales When a company makes a product and then tries to persuade customers to buy it, that’s Selling. 1 -4

Selling Emphasis is on the product. Company first makes the product and then figures out how to sell it. Management is sales volume oriented. Planning is short run oriented, in terms of today’s products and markets. Needs of sellers are stressed. Marketing Emphasis is on customers’ wants. Company first determines customers’ wants and then figures out how to make and delivers a product to satisfy those wants. Management is profit oriented Planning is long run oriented, in terms of new products, tomorrow’s market, and future growth. Wants of buyers are stressed. Difference between selling and marketing

Marketing process

Understanding the Marketplace and Customer Needs, Wants, and Demands n Needs are the basic human requirements. People need food, air, water, clothing & shelter to survive. n People also have needs for recreation, education and entertainment. n Eg: Hunger food. 1 -6

Understanding the Marketplace and Customer Needs, Wants, and Demands n Wants The needs become wants they are directed to specific objects that might satisfy the needs. n Eg: Mercedes Demands are wants backed by buying power 1 -7

Understanding the Marketplace and Customer Needs Market Offerings—Products, Services, and Experiences Consumer’s needs are fulfilled through market offerings Market offerings are some combination of products, services, information, or experiences offered to a market to satisfy a need or want 1 -8

Understanding the Marketplace and Customer Needs Market Offerings—Products, Services, and Experiences Marketing myopia is focusing only on existing wants and losing sight of underlying consumer needs ◦ ◦ Your offer (product, etc. ) is only a tool to satisfy a customer need/want, or solve a problem – customers’ want for your product can be replaced 1 -9

Understanding the Marketplace and Customer Needs Customer Value and Satisfaction Customers usually face broad array of product and services that might satisfy given need. How do they choose among these many market offerings? • Expectations • Customers forms expectation about the Value and satisfaction that various marketing offers will deliver and buy accordingly. • Marketers • Set the right level of expectations • Not too high or too low 1 -10

Understanding the Marketplace and Customer Needs Exchanges and Relationships Marketing occurs when people decide to satisfy needs and wants through exchange and relationship. Exchange is the act of obtaining a desired object from someone by offering something in return Relationships marketing consist of actions to build and maintain desirable relationships with Target audience involving product, service, idea or other object. 1 -11

Understanding the Marketplace and Customer Needs The concepts of exchange and relationships lead to the concept of market Markets are the set of actual and potential buyers of a product Marketing system consists of all of the actors (suppliers, company, competitors, intermediaries, and end users) in the system who are affected by major environmental forces • Demographic • Economic • Technological • Political–legal • Socio-cultural 1 -12

Figure 1 -2: Elements of a Modern Marketing System

Designing a Customer-Driven Marketing Strategy Marketing Management Once it fully understands consumers and the marketing place, marketing management can design a customerdriven strategy Marketing management is the art and science of choosing target markets and building profitable relationships with them • What customers will we serve? • How can we best serve these customers? 1 -14

Designing a Customer-Driven Marketing Strategy Selecting Customers to Serve Company decide who it will serve and which segment it will go after Market segmentation: Dividing the markets into segments of customers Target marketing: Which segments to go after 1 -14

Designing a Customer-Driven Marketing Strategy Selecting Customers to Serve De-marketing: Marketing to reduce demand temporarily or permanently; the aim is not to destroy demand but to reduce or shift it. 1 -15

Designing a Customer-Driven Marketing Strategy Choosing a Value Proposition Company must decide how it will serve targeted customers The value proposition is the set of benefits or values a company promises to deliver to customers to satisfy their needs 1 -17

Designing a Customer-Driven Marketing Strategy Marketing Management Orientations • • • Production concept Product concept Selling concept Marketing concept Societal concept 1 -18

Designing a Customer-Driven Marketing Strategy Marketing Management Orientations Production concept is the idea that consumers will favor products that are available or highly affordable 1 -19

Designing a Customer-Driven Marketing Strategy Marketing Management Orientations Product concept is the idea that consumers will favor products that offer the most quality, performance, and features for which the organization should therefore devote its energy to making continuous improvements 1 -20

Designing a Customer-Driven Marketing Strategy Marketing Management Orientations Selling concept is the idea that consumers will not buy enough of the firm’s products unless it undertakes a large scale selling and promotion effort 1 -21

Designing a Customer-Driven Marketing Strategy Marketing Management Orientations Marketing concept is the idea that achieving organizational goals depends on knowing the needs and wants of the target markets and delivering the desired satisfactions better than competitors do 1 -22

Marketing and Selling Concepts Contrasted Starting Point Factory Focus Existing products Means Selling and promoting Ends Profits through sales volume The Selling Concept (“inside-out”) Market Customer needs Integrated marketing Profits through customer satisfaction The Marketing Concept (“outside-in”)

Designing a Customer-Driven Marketing Strategy Marketing Management Orientations Societal marketing concept is the idea that a company should make good marketing decisions by considering consumers’ wants, the company’s requirements, consumers’ long-term interests, and society’s long-run interests 1 -23

Societal Marketing Concept Late 20 th Century – Still emerging Recognizes potential conflict Society (Long-term consumer & societal welfare) Maintain & improve long-term well-being Social responsibility Consumers (Short-term want satisfaction) Societal Marketing Concept Company (Profits) Be ethical Do good: • customer-oriented, • environment, • innovative (real, valued) product improvements • sense-of-highermission, give back Stop doing bad f

Preparing an Integrated Plan and Program Marketing Integrated Marketing Program Integrated marketing program is a comprehensive plan that communicates and delivers the intended value to chosen customers 1 -25

Preparing an Integrated and Program Marketing Plan Marketing Mix The marketing mix is the set of tools (four Ps) the firm uses to implement its marketing strategy • Product • Price • Promotion • Place 1 -24

Marketing Strategy g“Marketing Mix” The “ 4 Ps” (“ 4 Cs”) = controllable, tactical tools coordinated program Product (Customer Solution) Goods-and-services combination the company offers to the target market Activities that communicate the merits of the product and persuade target customers to buy it Price (Customer Cost) Target Customers Intended Positioning Advertising Personal Selling Sales Promotion Public Relations Promotion (Communication) Amount of money customers have to pay to obtain the product Activities that make the product available to target customers Place or Distribution (Convenience)

Building Customer Relationships Customer Relationship Management (CRM) Customer relationship management is the overall process of building and maintaining profitable customer relationships by delivering superior value and satisfaction 1 -26

Building Customer Relationships Customer Relationship Management (CRM) Customer perceived value is the difference between total customer value and total customer cost Customer satisfaction is the extent to which a product’s perceived performance matches a buyer’s expectations 1 -27

Customer Satisfaction = Performance (P) – Expectation (E) Expectations are largely based on marketer information and promises – must create realistically high expectations Performance exceeds expectations Reality = satisfaction has been declining Performance falls short of expectations P<E Customer is dissatisfied P>E Performance matches expectations P=E Customer is satisfied Customer is highly satisfied or delighted !

Building Customer Relationships Companies can build customer relationships at many levels, depending on the nature of the target • Many, low margin customers – basic relationships (e. g. , provide 800#, web site) • Few, high margin customers – full partnerships

Building Customer Relationships Partner relationship management involves working closely with partners in other company departments and outside the company to jointly bring greater value to customers

Building Customer Relationships Partner Relationship Management Partners inside the company is every function area interacting with customers ◦ Electronically ◦ Cross-functional teams Partners outside the company is how marketers connect with their suppliers, channel partners, and competitors by developing partnerships

Capturing Value from Customers Creating Customer Loyalty and Retention Customer lifetime value is the value of the entire stream of purchases that the customer would make over a lifetime of patronage losing a customer means losing the entire stream of purchases over a lifetime of patronage (combined customer lifetime value = customer equity or future potential profits) 1 -33

Capturing Value from Customers Growing Share of Customer Share of customer is the portion of the customer’s purchasing that a company gets in its product categories 1 -34

The New Marketing Landscape Major Developments • • Digital age Globalization Ethics and social responsibility Not-for-profit marketing 1 -37

The New Marketing Landscape The New Digital Age • • Recent technology has had a major impact on the ways marketers connect with and bring value to their customers Market research • • Learning about and tracking customers Create new customized products Distribution Communication • • Video conferencing Online data services 1 -38

The New Marketing Landscape The New Digital Age Internet—creates marketplaces and marketspaces • Information • Entertainment • Communication 1 -39

The New Marketing Landscape Rapid Globalization • • The world is smaller Think globally, act locally 1 -40

The New Marketing Landscape The Call for More Ethics and Social Responsibility Marketers are being called upon to take greater responsibility for the social and environmental impact of their actions in a global economy 1 -41

The New Marketing Landscape The Call for More Ethics and Social Responsibility Social marketing campaigns encourage energy conservation and concern for the environment or discourage smoking, excessive drinking, and drug use 1 -42

The New Marketing Landscape The Growth for Not-for-Profit Marketing • • • Colleges Hospitals Museums Zoos Orchestras Religious groups 1 -43