Marketing: Managing

Profitable Customer
Relationships
Chapter 1

Objectives
Be able to define marketing
and discuss its core concepts.
Be able to define marketing
management and compare
the five marketing
management orientations.

Objectives
Understand customer
relationship management
and strategies.
Realize the major
challenges facing marketers
in the new connected
millennium.

1.

Introduction

a. Todays successful companies

at all levels have one thing in
common.

1). All successful companies

are:
a). Strongly customer focused.

b). Heavily committed to

marketing.

 b- To be successful an organization

motivates everyone in the

organization to
produce superior
value for their customers, leading to
high levels of customer satisfaction.

What is Marketing?
Marketing is managing profitable
customer relationships
Attracting new customers
Retaining and growing current
customers

Marketing is NOT synonymous

with sales or advertising

2. What is
Marketing?
a. Creating customer
value and satisfaction are
at the very heart of modern
marketing thinking and
practice

2. What is
Marketing?

b. A very simple
definition of marketing is
managing profitable
customer relationships.

2. What is
Marketing?
1). The twofold goal of
marketing is to attract new
customers by promising
superior value and to keep and
grow current customers by
delivering

satisfaction.

 2). Sound marketing is

critical to the success of
every organization.

 c.

You already know a lot about

marketingits all around you.

Marketing Defined
d. Many people think of
marketing only as selling and
advertising.
1). Marketing is no longer telling
and selling.
2). Today, marketings new
sense is concerned with satisfying
customer needs.

What is Marketing?
Kotlers social definition:
Marketing is 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.

Needs, Wants, and

Demands

f. Human needs are the

most basic concept
underlying marketing.
-a human need is a state
of felt deprivation

1).

Humans have many complex

needs.

a). Basic, physical needs for

food, clothing, warmth, and
safety.
b). Social needs for belonging
and affection.
c). Individual needs for
knowledge and self-expression.

 2). These needs are part of

the basic human makeup.

 g. Another concept in marketing

is human wants. A human want is
the form that a human need
takes as shaped by culture and
individual personality.
h. Demands are human wants
that are backed by buying power.

 1). Consumers view products

as bundles of benefits and

choose products that give
them the best bundle for their
money

 i. Outstanding marketing
companies go to great
lengths to learn about and
understand their
customers needs, wants,
and demands.

What is Marketing?
Many Things Can Be
Marketed!
Goods
Places
Services

Properties

Experiences Organizations
Events

Information

Persons

Ideas

Marketing OffersProducts, Services,

and Experiences

j. Companies address needs

by putting forth a value

proposition, a set of benefits
that they promise to consumers
to satisfy their needs.

 1). The value proposition is

fulfilled through a marketing offer
some combination of products,
services, information, or
experiences offered to a
market to satisfy a need or want.

 2). The concept of product

is not limited to physical
objects and can include
experiences, persons,
places, organizations,
information, and ideas.

 3). Be careful of paying

attention to the product and not
the benefit being satisfied.
4). Marketing myopia is
caused by shortsightedness or
losing sight of underlying
customer needs by only
focusing on existing wants

 5). Smart marketers

create brand meaning and
brand experiences for
consumers.

What is Marketing?
Core Marketing Concepts
Needs, wants,
and demands
Marketing
offers: including
products,
services and
experiences

Value and
satisfaction
Exchange,
transactions
and
relationships
Markets

Value and
Satisfaction
k. Customer value is the
difference between the values
that the customer gains from
owning and using a product and
the costs of obtaining the
product. Customers
form expectations about the
value of various marketing offers
and buy accordingly.

 l. Customer satisfaction
depends on a products
perceived performance in
delivering value relative to a
buyers expectations. Customer
satisfaction is a key influence
on future buying behavior

 1). Marketers must be careful to

set the right level of expectations.
2). Customer value and customer
satisfaction are key building blocks
for
developing and managing customer
relationships.

Exchanges, Transactions, and

Relationships

m. Marketing occurs when

people decide to satisfy needs
and wants through exchange.
Exchange is the act of
obtaining a desired object
from someone by offering
something in return.

 n. Whereas exchange is a
core concept of marketing, a
transaction (a trade of values
between two parties) is
marketings unit of
measurement. Most involve
money, a response, and action.

 o. Marketing consists of
actions taken to build and
maintain desirable exchange
relationships with target
audiences involving a product,
service, idea, or other
object.

Markets
p. The concepts of
exchange and relationships
lead to the concept of a
market.
market is the
set of actual and potential
buyers of a product.

 1). Originally a market was a

place where buyers and sellers
gathered to exchange goods (such
as a village square).
2). Economists use the term to
designate a collection of buyers
and sellers who transact in a
particular product class (as in the
grain or housing market).

 3). Marketers see buyers

as constituting a market
and sellers constituting an
industry.

4). Marketers are

keenly interested in markets

Marketing
q. The concept of markets
brings one full circle to the
concept of marketing.

 1). Sellers must search for buyers,

identify their needs, design good products
and services, set prices for them, promote
them, and store and deliver them.

2). A modern marketing system

includes all of the elements necessary to
bring
buyers and sellers
together. This might include such
activities as product development,
research, communication, distribution,
pricing, and service.

 3). Each of the major actors

in a marketing system adds

value for the next level of the
system. There is often critical
interdependency among
network members.

Marketing
Management
Marketing management is
the art and science of
choosing target markets and
building profitable
relationships with them.
Creating, delivering and
communicating superior
customer value is key.

 1). Marketing management

involves managing demand,
which in turn involves
managing customer
relationships

Marketing
Management
Customer Management:
Marketers select customers
that can be served well and
profitably.

Demand Management:
Marketers must deal with
different demand states
ranging from no demand to
too much demand.

Customer and Demand

Management
b. Marketing management
is concerned not only with
finding and increasing
demand, but also with
changing or even reducing
it.

 1). Demarketings aim is to reduce

demand temporarily or permanently
(move traffic away from a popular
tourist attraction during peak
demand times).
2). In reality, marketing anagement
is customer management and
demand
management

Marketing
Marketing
Management
Management
Management Orientations
Selling
Production
concept
concept
Marketing
Product
concept
concept
Societal marketing concept

4. Marketing
Management
Orientations

a. There are five alternative

concepts under which
organizations conduct their
marketing activities: the
production, product, selling,
marketing, and societal
marketing concepts.

The Production
Concept
b. The production concept holds
that consumers will favor products
that are available and highly
affordable and that management
should, therefore, focus on
improving production and
distribution efficiency. This is one
of the oldest philosophies that
guides sellers

 c. The production concept is

useful when:
1). Demand for a product
exceeds the supply.
2). The products cost is too
high and improved productivity
is needed to bring it down.

 d. The risk with this concept

is in focusing too narrowly on
company operations. Do not
ignore the desires of the
market. This concept can lead
to marketing myopia.

The Product Concept

e. The product concept states
that consumers will favor products
that offer the most quality,
performance, and features, and
that the organization should,
therefore devote its energy to
making continuous product
improvements.

 1). Some manufacturers mistakenly

believe that if they build a better
mousetrap,consumers will beat a
path to their door just for their
product.
2). The product concept can also
lead to marketing myopia, the
failure to see the challenges being
presented by other products.

The Selling Concept

f. Many organizations follow the
selling concept. The selling
concept is the idea that
consumers will not buy enough of
the organizations products unless
the organization undertakes a
large-scale selling and promotion
effort.

 1). This concept is typically

practiced with unsought goods (those

that buyers do not normally think of
buying).

2). To be successful with this

concept, the organization must be
good at tracking down the interested
buyer and selling them on the
product benefits.

 3). Industries that use this concept

usually have overcapacity. Their aim
is to sell what they make rather than
make what will sell in the market
4). There are not only high risks
with this approach but low
satisfaction by customers.

The Marketing
Concept
g. The marketing concept holds
that achieving organizational
goals depends on determining the
needs and wants of target
markets and delivering the
desired satisfactions more
effectively and efficiently than
competitors do.

 1). Under the marketing

concept, customer focus and

value are paths to sales and
profits

 h. The marketing and selling concepts are

often confused. The primary differences
are:

1). The selling concept takes an

inside-out perspective (focuses on existing
products and uses heavy promotion and
selling efforts).

2). The marketing concept takes an

outside-in perspective (focuses on
customer
needs, values, and
satisfactions).

 i. Many companies claim to adopt the

marketing concept but really do not
unless
they commit to market-focused and
customer-driven philosophies.
1). Customer-driven companies
research current customers to learn
about their desires, gather new product
and service ideas, and test proposed
product improvements

 2). Such customer-driven marketing

usually works well when there exists a
clear need and when customers know what
they want.
3). When customers do not know what
they want, marketers can try customerdriving marketingunderstanding
customer needs even better than
customers themselves do, and creating
products and services that will meet
existing and latent needs now and in the
future.

The Societal Marketing

Concept
j. The societal marketing concept

holds that the organization should

determine the needs, wants, and
interests of target markets. It
should then deliver the desired
satisfactions more effectively and
efficiently than competitors in a
way that maintains or improves
the consumers and the societys
well-being.

 1). The societal marketing concept is the

newest of the marketing philosophies.
2). It questions whether the pure
marketing concept is adequate given the
wide variety of societal problems and ills.

3). According to the societal

marketing concept, the pure marketing
concept overlooks possible conflicts
between short-run consumer wants and
long- run consumer welfare.

 4). The societal concept calls

upon marketers to balance
three considerations in setting
their marketing policies:
a). Company profits.
b). Customer wants.
c). Societys interests.

 5). It has become good

business to consider and think
of societys interests when the
organization makes marketing
decisions.

CRM
CRM Customer
relationship
management . . .

is the overall process of building

and maintaining profitable
customer relationships by
delivering superior customer
value and satisfaction.

CRM
It costs 5 to 10 times MORE
to attract a new customer
than it does to keep a
current customer satisfied.
Marketers must be
concerned with the lifetime
value of the customer.

CRM
Customer value/satisfaction
Perceptions are key
Meeting/exceeding
expectations creates
satisfaction
Loyalty and retention
Benefits of loyalty
Loyalty increases as
satisfaction levels increase
Delighting consumers
should be the goal
Growing share of customer
Cross-selling

Key Concepts
Attracting,
retaining and
growing customers
Building customer
relationships and
customer equity

CRM
Customer equity

Key Concepts
Attracting,
retaining and
growing customers
Building customer
relationships and
customer equity

The total combined

customer lifetime
values of all
customers.
Measures a firms
performance, but
in a manner that
looks to the future.

CRM
Key

Customer relationship
Concepts levels and tools

Attracting,
retaining and
growing customers
Building customer
relationships and
customer equity

Target market typically

dictates type of
relationship
Basic

relationships
Full relationships

Customer loyalty and

retention programs
Adding

financial benefits
Adding social benefits
Adding structural ties

Marketing Challenges
Technological advances, rapid
globalization, and continuing
social and economic shifts are
causing marketplace changes.
Major marketing developments
can be grouped under the
theme of Connecting.

Marketing Challenges
Connecting
Via technology
With customers
With marketing
partners
With the world

Advances in computers,
telecommunications,
video-conferencing, etc.
are major forces.
Databases allow for
customization of
products, messages
and analysis of needs.

The Internet

Facilitates anytime,
anywhere connections
Facilitates CRM
Creates marketspaces

Marketing Challenges
Connecting
Via technology
With customers
With marketing
partners
With the world

Selective relationship
management is key.
Customer profitability
analysis separates
winners from losers.

Growing share of
customer
Cross-selling and upselling are helpful.

Direct sales to
buyers are growing.

Marketing Challenges
Connecting
Via technology
With customers
With marketing
partners
With the world

Partner relationship
management
involves:
Connecting inside
the company
Connecting with
outside partners
Supply

chain
management
Strategic alliances

Marketing Challenges
Connecting
Via technology
With customers
With marketing
partners
With the world

Globalization
Competition
New opportunities

Greater concern for

environmental and
social responsibility
Increased marketing
by nonprofit and
public-sector entities
Social marketing
campaigns