Chapter 1 | Marketing: Creating and Capturing Customer Value 51

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practice customer relationship management to create customer satisfaction and delight. In
creating customer value and relationships, however, the company cannot go it alone. It
must work closely with marketing partners both inside the company and throughout its
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step, the company reaps the rewards of its strong customer relationships by capturing value
from
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Finally, in the face of today’s changing marketing landscape, companies must take into
account three additional factors. In building customer and partner relationships, they must
harness marketing technology, take advantage of global opportunities, and ensure that they
act in an environmentally and socially responsible way.
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introduce the marketing process, with a focus on building customer relationships and cap
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process—understanding the marketing environment, managing marketing information,
and understanding consumer and business buyer behavior. In Chapter 7, we look more
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serve (segmentation and targeting) and determining a value proposition (differentiation
and positioning). Chapters 8 through 17 discuss the marketing mix variables, one by one.
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global marketing and sustainable marketing.

Reviewing the Concepts

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Reviewing Objectives and Key Terms

Objectives Review
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The marketing process involves five steps. The first four steps
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GP create value for customers. First, marketers need to understand
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is to build and manage profitable customer relationships. FST
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of getting, keeping, and growing target customers. In the third
Defi ne marketing and outline step, marketers construct a marketing program that actually
Objective 1 delivers superior value. All of these steps form the basis for the
the steps in the marketing
fourth step, building profitable customer relationships and creat
process. (pp 26–28) ing customer delight. In the final step, the company reaps the
Marketing is the process by which companies create value for rewards of strong customer relationships by capturing value from
customers and build strong customer relationships in order to customers.
capture value from customers in return.
52 Part 1 | Defining Marketing and the Marketing Process
Explain the importance of
Objective 2
understanding the marketplace
and customers and identify the fi ve core
marketplace concepts. (pp 28–30)
Outstanding marketing companies go to great lengths to learn
about and understand their customers’ needs, wants, and EF
mands
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which they can capture customer lifetime value and greater share
of customer
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customer equity
for the firm.
The core marketplace concepts are needs, wants, and de
mands; market offerings (products, services, and experiences);
value and satisfaction; exchange and relationships; and markets.
Wants are the form taken by human needs when shaped by cul
ture and individual personality. When backed by buying power,
wants become demands. Companies address needs by putting
forth a value proposition, a set of benefits that they promise to
consumers to satisfy their needs. The value proposition is ful
filled through a market offering, which delivers customer value
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In building customer relationships, good marketers realize that
with customers.
Identify the key elements of
Objective 3
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strategy and discuss the marketing management
orientations that guide marketing strategy.
(pp 30–34)
To design a winning marketing strategy, 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 cultivate (target marketing). Next, the com
pany must decide how it will serve targeted customers (how it will
differentiate and position itself in the marketplace).
Marketing management can adopt one of five competing
market orientations. The production concept holds that manage
ment’s task is to improve production efficiency and bring down
prices. The product concept holds that consumers favor prod
ucts that offer the most in quality, performance, and innovative
features; thus, little promotional effort is required. The selling
concept holds that consumers will not buy enough of an orga

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promotion effort. The marketing concept holds that achieving or


ganizational goals depends on determining the needs and wants
of target markets and delivering the desired satisfactions more
effectively and efficiently than competitors do. The societal mar
keting concept holds that generating customer satisfaction and
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egies is key to both achieving the company’s goals and fulfilling
its responsibilities.
Discuss customer relationship
Objective 4
management and identify
strategies for creating value for customers and
capturing value from customers in return.
(pp 34–44)
Broadly defined, customer relationship management is the pro
cess of building and maintaining profitable customer relationships
by delivering superior customer value and satisfaction. The aim of
customer relationship management is to produce high customer
equity, the total combined customer lifetime values of all of the
company’s customers. The key to building lasting relationships is
the creation of superior customer value and satisfaction.
Companies want to not only acquire profitable customers but
also build relationships that will keep them and grow “share of
customer.” Different types of customers require different cus
tomer relationship management strategies. The marketer’s aim
is to build the right relationships with the right customers. In
return for creating value for targeted customers, the company
captures value from customers in the form of profits and cus
tomer equity.
they cannot go it alone. They must work closely with marketing
partners inside and outside the company. In addition to being
good at customer relationship management, they must also be
good at partner relationship management.
Describe the major trends and
Objective 5
forces that are changing the
marketing landscape in this age of relationships.
(pp 44–51)
Dramatic changes are occurring in the marketing arena. The
Great Recession left many consumers short of both money and
confidence, creating a new age of consumer frugality that will last
well into the future. More than ever, marketers must now em
phasize the value in their value propositions. The challenge is to
balance a brand’s value proposition with current times while also
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The boom in digital technology has created exciting new ways
to learn about and relate to individual customers. It has also al
lowed new approaches by which marketers can target consumers
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in the digital era. In recent years, marketing also has become a
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such as colleges, hospitals, museums, zoos, symphony orches
tras, and even churches.
In an increasingly smaller world, many marketers are now con
nected globally with their customers and marketing partners. To
day, almost every company, large or small, is touched in some
way by global competition. Finally, today’s marketers are also
reexamining their ethical and societal responsibilities. Marketers
are being called to take greater responsibility for the social and
environmental impact of their actions.
Pulling it all together, as discussed throughout the chapter, the
major new developments in marketing can be summed up in a
single word: relationships. Today, marketers of all kinds are tak
ing advantage of new opportunities for building relationships with
their customers, their marketing partners, and the world around
them.
 Chapter 1 | Marketing: Creating and Capturing Customer Value 53

Key Terms
Objective 1 Objective 3 Customer satisfaction (p 35)
Marketing (p 27) Marketing management (p 30) Customer-managed relationships
Production concept (p 31) (p 39)
Objective 2 Product concept (p 32) Consumer-generated marketing (p 40)
Needs (p 28) Selling concept (p 32) Partner relationship management
Wants (p 28) Marketing concept (p 32) (p 41)
Demands (p 28) Societal marketing concept (p 33) Customer lifetime value (p 42)
Market offerings (p 28) Share of customer (p 42)
Marketing myopia (p 29) Objective 4 Customer equity (p 43)
Exchange (p 29) Customer relationship management Objective 5
Market (p 29) (p 34)
Customer-perceived value (p 35) Internet (p 47)

Discussion and Critical Thinking

Discussion Questions
1. Define marketing and outline the steps in the marketing pro- 4. Discuss trends impacting marketing and the implications of
cess. (AACSB: Communication) these trends for how marketers deliver value to customers.
2. What is marketing myopia, and how can it be avoided? (AACSB: Communication)
(AACSB: Communication; Reflective Thinking)
3. What is customer-perceived value, and what role does it play
in customer satisfaction? (AACSB: Communication; Reflective
Thinking)

Critical Thinking Exercises

1. Form a small group of three or four students. Discuss a need
or want you have that is not adequately satisfied by any offer-
ings currently in the marketplace. Think of a product or service
that will satisfy that need or want. Describe how you will dif-
ferentiate and position your offering in the marketplace and
develop the marketing program for your offering. Present your
ideas to the other groups. (AACSB: Communication; Reflec-
tive Thinking)
2. Search the Internet for salary information regarding jobs in
marketing from a Web site such as www.simplyhired.com/a/
salary/search/q-marketing or a similar site. What is the na-
tional average salary for five different jobs in marketing? How
do the averages compare in different areas of the country?
Write a brief report on your findings. (AACSB: Communication;
Use of IT; Reflective Thinking)
3. Interview someone who works in a marketing job and ask him
or her the following questions:
a. What does your job entail?
b. How did you get to this point in your career? Is this what
you thought you’d be doing when you grew up? What in-
fluenced you to get into this field?
c. What education is necessary for this job?
d. What advice can you give to college students?
e. Add one additional question that you create.
Write a brief report of the responses to your questions and
explain why you would or would not be interested in working in
this field. (AACSB: Communication; Reflective Thinking)
54 Part 1 | Defining Marketing and the Marketing Process
Applications and Cases
Marketing Technology Apple and Adobe—Flash Clash
Apple’s iDevices are wildly popular, starting with the iPod followed
by iPhones and iPads. But where’s the flash? Adobe Flash, that
is. Adobe’s Flash, the long-standing multimedia platform behind
approximately 75 percent of the animated and streaming audio
and video on the Internet, is not supported by Apple’s devices.
Many purchasers were disappointed after spending hundreds of
dollars on sleek iPads only to realize they couldn’t play their fa-
vorite Internet game or watch that funny video on their device.
And they still can’t, even with the second-generation device, the
iPad 3. It seems Apple’s late founder and CEO, Steve Jobs, didn’t
like Flash and would not support it on Apple’s devices. Instead,
app developers must conform to Apple’s operating system and
Marketing Ethics Goodbye Big Gulp
With two-thirds of adults and one-third of school-aged children
in the United States overweight or obese, New York City Mayor
Michael Bloomberg is taking action against the soft drink indus-
try. Mayor Bloomberg proposed a ban on big sugary drinks such
as 7–11’s mammoth 32-ounce “Big Gulp.” The ban would put a
16-ounce cap on fountain and bottled drinks sold at restaurants,
theaters, and sporting events. While it applies to drinks having
more than 25 calories per 8 ounces, it does not apply to 100 per-
cent juice or milk-based beverages. Establishments serving foun-
tain drinks will see a significant revenue drop because these drinks
are often marked up 10 to 15 times their cost. Many consumers
oppose the ban because they perceive it as further encroach-
ment of the “nanny state.” Mayor Bloomberg has already banned
Marketing by the Numbers
Marketing is expensive! A 30-second advertising spot during the
2012 Super Bowl cost $3.5 million, and that doesn’t include the
$500,000 or more to produce the commercial. Anheuser-Busch
usually purchases multiple spots each year. Similarly, sponsoring
one car during one NASCAR race costs $500,000. But Sprint,
the sponsor of the popular Sprint Cup, pays much more than
that. And what marketer sponsors only one car for only one race?
Want customers to order your product by phone? That will cost
you $8 to $13 per order. Or how about a sales representative
calling on customers? That costs about $100 per sales call, and
that’s if the rep doesn’t have to get on an airplane and stay in
a hotel, which can be very costly considering some companies
have thousands of sales reps calling on thousands of customers.
And what about the $1-off coupon for Tropicana orange juice that
existing applications on the Web must convert to HTML5 to play
on an Apple product. Adobe’s co-founders claim Apple is “un-
dermining the next chapter of the Web” and bloggers exclaim
this is not just an “Adobe/Apple problem . . . but an Apple/World
problem.”
1. Does Apple appear to embrace the marketing concept?
(AACSB: Communication; Reflective Thinking)
2. Research the controversy surrounding this issue and debate
whether Apple did the right thing for its customers by not in-
cluding the ubiquitous Adobe Flash software on Apple’s prod-
ucts. (AACSB: Communication; Reflective Thinking)
smoking in public parks and trans fats in restaurant foods, as well
as requiring chain restaurants to include calorie information on
menus. This leads many to ask, “What’s next?”
1. Is it fair to single out soda in such a ban? Debate this argu-
ment from all sides of this issue: government, soft drink mar-
keters, and consumers. (AACSB: Communication; Reflective
Thinking)
2. Should marketers embrace the societal marketing concept
with respect to foods or products that could be harmful to
consumers? Discuss an example of a company embracing
the societal marketing concept with respect to the obesity
epidemic. (AACSB: Communication; Ethical Reasoning)
How Much Is Enough?
you got in the Sunday newspaper? It costs Tropicana more than a
$1 when you redeem it at the store. These are all examples of just
one marketing element—promotion. Marketing costs also include
the costs of product research and development, the costs of dis-
tributing products to buyers, and the costs of all the employees
working in marketing.
1. Describe trends in marketing expenditures. What factors
are driving these trends? (AACSB: Communication; Analytic
Reasoning)
2. What percentage of sales should a business devote to mar-
keting? Discuss the factors used in this decision. (AACSB:
Communication; Analytic Reasoning)
 Chapter 1
Video Case Zappos
These days, online retailers are a dime a dozen. But in a short
period of time, Zappos has become a billion-dollar e-tailer. How
did it hit the dot-com jackpot? By providing some of the best
service available anywhere. Zappos customers are showered
with such perks as free shipping both ways, surprise upgrades
to overnight service, a 365-day return policy, and a call center
that is always open. Customers are also delighted by employees
who are empowered to spontaneously hand out rewards based
on unique needs.
With such attention to customer service, it’s no surprise that
Zappos has an almost cultlike following of repeat customers.
But remaining committed to the philosophy that the customer is
Abou Shakra Restaurant: Creating Customer
Company Case Value The Old-Fashioned Way
Abou Shakra is a chain of restaurants in Egypt well known for
charcoal cooking—grilled meat, kebabs, and kofta. In 1947
Ahmed Abou Shakra opened his first Abou Shakra restaurant in
El Kasr El Einy, a famous central district in Cairo. The first restau-
rant was not in a consumer-attractive neighborhood, but that did
not stop Abou Shakra, who believed that offering healthy, tasty,
and well-marinated food was more important than location in at-
tracting customers and having them return time and again—if
they received a good meal, the location of the restaurant would
not have much bearing on their future dining decisions.
Initially the restaurant’s menu was very simple; it mainly con-
sisted of basic traditional Egyptian dishes, which was the stan-
dard menu offered in similar establishments at the time. Abou
Shakra decided to keep his menu simple and traditional to avoid
the risks associated with offering unfamiliar dishes to consumers.
As a result, he focused on providing well-known traditional dishes
of exceptional quality.
Successing in a Competitive Market
When the first Abou Shakra restaurant was established, there was
not a wide variety of cuisines featured at restaurants, such as Indian,
Chinese, and Italian, which are widely available today. As noted,
Abou Shakra’s competitors at the time also offered traditional oriental
Egyptian food, and due to the lack of other cuisines, he was essen-
tially competing with the whole market. It was thus very challenging
to start up a business in this highly competitive market, and it was
necessary for Abou Shakra to ensure that he could offer something
that would give him an advantage over his competitors. This ad-
vantage turned out to be the great customer value offered by Abou
Shakra, which was not offered by the majority of his competitors.
The Abou Shakra restaurants have maintained the persistent
focus on customer well-being and satisfaction that originally gave
them an advantage over their competitors, and this is one of the
reasons for their success. The importance that the company places
on elegant dishes, prepared with passion, and providing a memo-
rable experience to their guests had endured right from the Abou
Shakra’s establishment. Since it was established, Abou Shakra res-
taurants have been following that philosophy, and this is another
reason for their success. We will now take a closer look at how
Abou Shakra applies this philosophy and offers customer value.
| Marketing: Creating and Capturing Customer Value 55
always right can be challenging. This video highlights some of the
dilemmas that can arise from operating within a highly customer-
centric strategy. Zappos also demonstrates the ultimate rewards
it receives from keeping that commitment.
After viewing the video featuring Zappos, answer the following
questions:
1. Describe Zappos’ market offering.
2. What is Zappos’ value proposition? How does it relate to its
market offering?
3. How does Zappos build long-term customer relationships?
Abou Shakra owns its own factory, which supplies all branches
and outlets with their daily requirements of fresh meat and poultry.
The meat is of high quality—only the best beef and lamb. Meat
is delivered to the factory daily, and a governmental veterinary
inspection is performed to ensure that the meat is fresh and of
good quality. The factory is equipped with the latest technology
to guarantee that the meat is stored at the correct temperature to
ensure its freshness.
The fruits and vegetables are also delivered daily and are
specially stored to maintain freshness up to the time of serving.
Abou Shakra’s quality control department ensures that all finished
products are of outstanding quality, and oversees practices that
prevent any of the ingredients from being contaminated. The
company has signed a contract with SGS Egypt to supervise its
health, safety, and hygiene practices, ensuring that they are of the
highest standard.
The Abou Shakra menu has changed very little over the past
60 years, maintaining the simple offering of traditional Egyptian
dishes with a particular focus on grilled dishes, which is now
Abou Shakra’s speciality.
The primary aim of Abou Shakra is to keep the menu simple so
as to wholly master the dishes offered. This has encouraged cus-
tomer loyalty, as customers often choose their favorite dishes for
which they have come especially for. This has led to Abou Shakra
being one of the most popular places for oriental food in Egypt.
Keeping the menu simple also limits the costs of purchasing
different ingredients from several suppliers. If this was not the
case, the recruitment of more managers would be required to
contact the suppliers and follow up on the orders. There would
also be more supervisors needed to ensure that the delivery and
storage processes take place smoothly and that each outlet re-
ceives its supplies on time. In addition, more chefs who are spe-
cialized in the new dishes added to the menu would be necessary
as well.
Abou Shakra’s managers pay attention to every small detail;
they ensure that each restaurant is spotless and that the kitchen
is held to the highest cleanliness standards. All utensils and cut-
lery go through a sterilization process to ensure their sanitation
and safety. The tables are wiped with a special detergent so that
customers feel they are eating in a hygienic environment.
56 Part 1 | Defining Marketing and the Marketing Process
Focusing on Customer Service
Abou Shakra restaurants do not rely solely on their food to please
their customers, but also on well-trained employees who deliver
extraordinary customer service. They hire energetic, friendly, and
passionate employees. Abou Shakra restaurants realized the
significance of educating their workers as to the importance of
customer satisfaction, and this led to the establishment of their
own training center. The center has a proficient team of trainers
who ensure that employees will have the necessary skills so that
guests will be provided with the best service. Abou Shakra relies
on continuous training to provide employees with the necessary
confidence and skills to provide the utmost customer satisfaction.
The company believes that its greatest asset is its employees, and
Abou Shakra thus invests heavily in appropriately recruiting and
training them in order to maintain the company’s standards in the
competitive market. One of the core principles of the company is
that by taking good care of the employees, the employees will take
good care of the customers.
International Expansion
Abou Shakra’s solid customer base is not only due to the quality
of the food and the service offered, but also to its slow-growth
expansion strategy. Abou Shakra restaurants cannot be found
on every corner; after 65 years, only 12 outlets are operating
throughout Egypt. Abou Shakra decided to stay small and focus
on having a few outlets that provide outstanding service rather
than have many outlets with average service. A new outlet is only
opened when the required employees have been trained and
are prepared to offer the outstanding service that is associated
with Abou Shakra. It took the company 56 years to open its first
branch outside Cairo, which debuted in Alexandria in 2003.
The popularity of Abou Shakra has extended far beyond Egypt,
with the company receiving many requests to open international
branches from customers living abroad who had tasted Abou
Shakra while on holiday. The opening of a branch in Saudi Arabia
in 2005 and another in Kuwait in 2007 are great milestones in the
history of Abou Shakra.
This expansion was not an easy step for the company, and a
great deal of research was undertaken beforehand to find the cor-
rect locations for the restaurants. First, Abou Shakra needed to
find suppliers who could deliver fresh ingredients on a daily basis;
this was an important factor, because for Abou Shakra to suc-
ceed, it had to be ensured that the quality of food provided in any
new outlets would equal that of the Egyptian branches. Employ-
ees also needed to be recruited and trained in the same manner
as the employees in Egypt, to make sure that they provide their
customers with the same outstanding service.
Along with other aspects of its simple but focused strategy,
Abou Shakra does not spend a great deal on advertising. Only
a small proportion of its budget is set aside for advertising in
newspapers and on television, as the company relies heavily on
word-of-mouth recommendations between customers and their
friends and families. Abou Shakra believes that the main objec-
tive is to take care of customers, and that to provide them with
high-quality food and service is better than spending money on
advertising, as satisfied customers will be the best advertising
tool. They will tell their friends and family about their positive
experiences at Abou Shakra, and consumers are more likely to
follow the advice of people close to them than promotional ads.
This is also a strategy the company uses to reduce expenses,
as instead of spending a large amount of money on advertising,
which may not generate profitable returns, that money is instead
spent on increasing the quality of the food and service provided.
Many have questioned whether or not Abou Shakra’s 65-year
legacy can be sustained. Its restaurants are run by co-founders
and owners Ahmed and Hussein Abou Shakra, who have drawn
up an efficient blueprint for all of their employees to follow. They
believe that if desirable employees are recruited and trained cor-
rectly and provided with the appropriate working environment,
then the success of the business is inevitable.
Ahmed Abou Shakra, the company’s chairman, played a criti-
cal role in the formation of the strategy that the company would
follow. He detailed the long- and short-term goals in a manner
that is easy for all involved to comprehend. The daily operations
are organized and controlled by him, and he has developed an
efficient system to ensure that managers report to him. This sys-
tem was developed when the business began to grow, as one
person could not manage the daily operations of every restaurant
efficiently.
Hussein Abou Shakra is the vice chairman of the company,
and he ensures that the financial goals and objectives of the com-
pany are being met. He supervises the preparation of the financial
statements and the budgets of the company. In the same manner
as the chairman, he has set up a structure by which all the finance
managers report to him with daily updates.
The legacy of Abou Shakra is expected to continue with or
without its founders. This is because Abou Shakra has become
a corporation that was established with strategies and objectives
that, if managed correctly, will lead to a successful business. This
business legacy is much bigger than its founders, and so long as
the business objectives are being met and the customers con-
tinue to be placed first, it is expected to last.
Questions for Discussion
1. Describe Abou Shakra in terms of the value it provides for
customers.
2. Do you think Abou Shakra should develop a high-growth
strategy? Why or why not?
3. Should Abou Shakra spend more on advertising than is cur-
rently expended?
4. Do you think that the legacy of Abou Shakra will continue, with
consumer tastes changing and moving toward nontraditional
cuisine? Why or why not?
5. Suggest other methods by which Abou Shakra can provide
value to its customers.
Sources: “Abou Shakra, Cairo—Restaurant Review,” Reviews of Hotels,
Flights and Vacation Rentals, TripAdvisor, www.tripadvisor.com/Restau-
rant_Review-g294201-d1201482-Reviews-Abou_Shakra-Cairo.html, ac-
cessed November 5, 2012; and “Abou Shakra,” www.aboushakra.net/
main.htm, accessed November 5, 2012.