CHAPTER 1

Marketing: Creating and Capturing Customer Value

Chapter Overview
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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. Discuss customer relationship management and creating value for and capturing value from customers. Describe the major trends and forces changing the marketing landscape.

Case Study Proctor and Gamble

Value Creation for Tide

Building Relationships

History: Tide is an innovative brand, historically positioned on the basis of superior functional performance. At Issue: Competitors can copy product benefits quickly, but can not copy feelings toward the brand.

Research Process: Explored emotional connections women have with their laundry via consumer immersion. Findings: Women are linked emotionally to clothing. Fabrics allow women to express their attitidues, personality, and multiple faces of being female. Tide Knows Fabrics Best: Campaign featured in rich visual imagery and meaningful emotional connections.

Challenge: Understand what the brand name means to consumers and how it fits into their lives.
Goal: Speak eye-to-eye with consumers.

Result: 7% sales increase.

What Is Marketing?
Simple Definition: Marketing is managing profitable customer relationships.

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

A social and managerial process by which individuals and groups obtain what they need and want through creating and exchanging products and value with others.
NEW View New View of Marketing: of Marketing:

Making a Sale Telling & Selling

OLD View of Marketing:

Satisfying Satisfying Customer Needs customer needs

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The Marketing Process

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 a marketing program that delivers superior value. Build profitable relationships and create customer delight. Capture value from customers to create profits and customer quality.

Needs, Wants, & Demands

Need: State of felt deprivation including physical, social, and individual needs.
Physical needs:
Food, clothing, shelter, safety

Social needs:
Belonging, affection

Individual needs:
Learning, knowledge, self-expression

Needs, Wants, & Demands

Wants: Form that a human need takes, as shaped by culture and individual personality. Wants + Buying Power = Demand

Need / Want Fulfillment

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.

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Need / Want Satisfiers

Products:
Persons Places Organizations Information Ideas

Services
Activity or benefit offered for sale that is essentially intangible and does not result in ownership.

Brand Experiences:
. . . dazzle their senses, touch their hearts, stimulate their minds.
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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 existing wants and lose sight of the underlying needs.

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Value & Satisfaction

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.

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Exchange vs. Transaction

Exchange:
Act of obtaining a desired object from someone by offering something in return.

Transaction:
A trade of values between two parties. One party gives X to another party and gets Y in return. Can include cash, credit, or check.
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What Is a Market?

The set of actual and potential buyers of a product. These people share a need or want that can be satisfied through exchange relationships.

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Modern Marketing Systems

Main elements in a modern marketing system include:

Suppliers Company (marketer) Competitors Marketing intermediaries Final users

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Marketing Management

The art and science of choosing target markets and building profitable relationships with them.
Requires that consumers and the marketplace be fully understood What Customers Will We Serve? How will we Serve them Best? (Our VALUE Proposition)
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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?
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Segmentation & Target Marketing

Market Segmentation:
Divide the market into segments of customers

Target Marketing:
Select the segment to cultivate

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Marketing Management

Demand Management
Finding and increasing demand, also changing or reducing demand, as in demarketing.

Demarketing
Temporarily or permanently reducing the number of customers or shifting their demand.
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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.

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Marketing Management Philosophies

Production Concept Product Concept Selling Concept Marketing Concept Societal Marketing Concept

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The Marketing Plan

Transforms the marketing strategy into action Includes the marketing mix and 4 Ps of marketing:

Product Price Place (Distribution) Promotion

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Customer Relationship Management

The overall process of building and maintaining profitable customer relationships by delivering superior customer value and satisfaction.
Acquiring customers Keeping customers Growing customers

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Customer Perceived Value

Customers evaluation of the difference between all of the benefits and all of the costs of a marketing offer relative to those of competing offers.

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Customer Satisfaction

Dependent on the products perceived performance relative to a buyers expectations.

Customer satisfaction often leads to consumer loyalty. Some firms seek to DELIGHT customers by exceeding expectations.

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Customer Relationships

Loyalty and retention programs build relationships and may feature:

Financial Benefits
EX: Frequency marketing programs

Social Benefits
EX: Club marketing programs

Structural Ties

Focus is on relating directly to profitable customers, for the long term.

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Partner Relationship Marketing

Marketing partners help create customer value and assist in building customer relationships. Partners inside the firm:

All employees customer focused Teams coordinate efforts toward customers

Partners outside the firm:

Supply chain management Strategic alliances

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Customer Loyalty & Retention

Customer Lifetime Value

The entire stream of purchases that the customer would make over a lifetime of patronage.

Share of Customer
The share a company gets of the customers purchasing in their product categories.

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Customer Equity

The combined discounted customer lifetime values of all the companys current and potential customers.
Classify customers by loyalty and potential profitability Manage accordingly

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Customer Relationship Groups

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New Marketing Landscape

The New Digital Age Rapid Globalization Ethics and Social Responsibility Not-for-Profit Marketing New World of Marketing Relationships

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The New Digital Age

Technology impacts the ways firms bring value to their customers. Greater connectivity means greater access to information, faster travel and communication. The Internet allows anytime, anywhere connections between firms and customers.

Click-and-mortar companies Click-only companies Business-to-business e-commerce

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You Should Now be Able to:

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. Discuss customer relationship management and creating value for and capturing value from customers. Describe the major trends and forces changing the marketing landscape.

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