Priciples of Marketing

by Philip Kotler and Gary Armstrong

Chapter 1
Marketing:Creating and Capturing
Customer Value

PEARSON
Objective Outline
What Is Marketing
1 Define marketing and outline the steps in the
marketing process.

Understanding the Marketplace and Customer

Needs
Explain the importance of understanding customers
2
and the marketplace and identify the five core
marketplace concepts.
Objective Outline

Designing a Customer-Driven Marketing

Strategy
Preparing an Integrated Marketing Plan and
3 Program
Identify the key elements of a customer-driven marketing
strategy and discuss the marketing management
orientations that guide marketing strategy.
Objective Outline

Building Customer Relationships

Capturing Value from Customers
4 Discuss customer relationship management and
identify strategies for creating value for customers
and capturing value from customers in return.

The Changing Marketing Landscape

5 Describe the major trends and forces that are
changing the marketing landscape in this age of
relationships.
What Is Marketing?

Simplest
definition

Marketing is Attract new Keep and grow

managing profitable customers by current customers
customer promising superior by delivering
relationships. value satisfaction.
Marketing Defined

Broadly defined, marketing is a social and managerial

process by which individuals and organizations obtain
what they need and want through creating and
exchanging value with others.

We define marketing as a process by which companies

create value for customers and build strong customer
relationships to capture value from customers in return.
 Marketing Process
This important figure shows marketing in a nutshell. By
creating value for customers, marketers capture value from
customers in return. This five-step process forms the
marketing frame work for the rest of the chapter and the
remainder of the text.

Construct
Construct anan Build
Build profitable
profitable Capture
Capture value
value
Understand
Understand the
the Design
Design integrated
integrated relationships
relationships from
from
marketplace
marketplace and
and customer-driven
customer-driven marketing
marketing and
and create
create customers
customers to
to
customer
customer needs
needs marketing
marketing program
program that
that customer
customer create
create profits
profits
and
and wants
wants strategy
strategy delivers
delivers delight
delight and
and customer
customer
superior
superior value
value equity
equity

Create value for customers and

build customer relationships Capture value from
customers in return
Understanding the Marketplace
and Customer Needs
Customer Needs, Wants, and Demands

Needs States of felt deprivation

• Physical—food, clothing, warmth, safety
• Social—belonging and affection
• Individual—knowledge and self-expression

Wants
• Form that needs take as they are shaped by culture and
individual personality
Understanding the Marketplace
and Customer Needs
Customer Needs, Wants, and Demands

Demands
• Human wants backed by buying power 。
Market Offerings-Products, Wants,
and Demands
 Market offerings are some combination of prod
ucts, services, information, or experiences offere
d to a market to satisfy a need or a want.

 Marketing myopia is focusing only on existing

wants and losing sight of underlying consumer ne
eds.
Customer Value and Satisfaction
Expectations
 Customers
• From expectations about the value and satisfaction that v
arious market offerings
• Will deliver and buy accordingly.

 Marketers
• Set the right level of expectations
• Not too high or low
Exchanges and Relationships
 Exchange
• the act of obtaining a desired object from someone by of
fering something in return
 Relationship
• Marketing actions try to create, maintain, grow exchang
e relationships.
Markets
• Each party in the system adds value. Walmart cannot fulfill
 its promise of low prices unless its suppliers provide low
Markets are the set of actual and potential
costs. Ford cannot deliver a high-quality car-ownership
buyer
s of aexperience
product. unless its dealers provide outstanding service.
• Arrows represent relationships that must be developed and
managed to create customers value and profitable customer
relationships.
Designing a Customer-Driven Market
ing Strategy
 We define marketing management is the art and
science of choosing target markets and building p
rofitable relationships with them.

What
Twocustomers
important questions:
will we serve
(what’s our target market)? Ch2

How can we serve these

customers best (what’s our Ch7
value proposition)?
Selecting Customers to Serve
 Market segmentation refers to dividing the marke
ts into segments of customers.
 Target marketing refers to which segments to go
after.
Choosing a Value Proposition
 A brand’s value proposition is the set of benefits
or values it promises to deliver to consumers to s
atisfy their needs.
Marketing Management Orientatio
ns
The The The The The
The
Produc Produc Sellin Market Societal
Societal
tion t g ing Marketin
Marketin
Concep Concep Concep Concep gg
Concept
Concept
t t t t

The Product Concept

The Societal Marketing Concept
The
The product The Selling
Marketing
Production
concept Concept
Concept
Concept
holds that consumers will
The societal marketing concept holds that
The selling
favormarketingconcept
production
products conceptholdsthe
concept
that offer that
depends
holds consumers
on
that
most knowingwillthe
consumers
quality, not
will
marketing strategy should deliver value to customers
buy
needs
favorenough
products
performance, ofand
and wants the
that firm’s
offeatures.
are products
the available
target isunless
markets
Focusand and itdelivering
highly
on continuous
in a way that maintains or improves both the
undertakes
the desired
affordable.
product asatisfactions
large scale selling
improvements. and competitors
better than promotion effort
do.
consumer’s and society’s well-being.
Marketing Management Orientatio
ns
• The selling concept takes an inside-out view that focuses on
existing products and heavy selling. The aim is to sell what the
company makes rather than making what the customer wants.
• The marketing concept takes an outside-in view that focuses on
satisfying customer needs as a path to profits. As South-west
Airlines’ colorful founder puts it, “We don’t have a marketing
department, we have a customer department.”
Preparing an Integrated
Marketing Plan and Program
 The marketing mix is the set of tools (four Ps) the
firm uses to implement its marketing strategy. It i
ncludes product, price, promotion, and place.

Price
ct
Produ o tion
Prom

 The firm must blend each marketing mix tool int

o a comprehensive integrated
Place marketing program
that communicates and delivers the intended valu
e to chosen customers.
Building Customer Relationships
Customer Relationship Management (CRM)

 In this broader sense, customer relationship ma

nagement is the overall process of building and
maintaining profitable customer relationships by
delivering superior customer value and satisfactio
n.
Relationship Building Blocks:
Customer Value and Satisfaction
 A customer buys from the firm that offers the hig
hest customer-perceived value—the customer’s
evaluation of the difference between all the benef
its and all the costs of a market offering relative t
o those of competing offers.
 Customer satisfaction depends on the product’s
perceived performance relative to a buyer’s expe
ctations. If the product’s performance falls short
of expectations, the customer is dissatisfied.
Customer Relationship Levels and
Tools
 Companies can build customer relationships at m
any levels, depending on the nature of the target
market.
 Many companies offer frequency marketing prog
rams that reward customers who buy frequently o
r in large amounts.
 Other companies sponsor club marketing progra
ms that offer members special benefits and create
member communities.
The Changing Nature of Customer
Relationships
 Today’s companies are building deeper, more dir
ect, and lasting relationships with more carefully
selected customers.
Relating with More Carefully Select
ed Customers
 Today, most marketers realize that they don’t wan
t relationships with every customers. Instead, the
y target fewer, more profitable customers.
Relating More Deeply and Interacti
vely
 Relating more deeply and interactively by incorporating
more interactive two way relationships through blogs, We
bsites, online communities and social networks
 Today’s consumers have more information about brands t
han ever before, and they have a wealth of platforms for a
iring and sharing their brand views with other consumers.
Thus, the marketing world is now embracing not only cus
tomer relationship management, but also customer-mana
ged relationships.
 A growing part of the new customer dialogue is consume
r-generated marketing, by which consumers themselves
are playing a bigger role in shaping their own brand exper
iences and those of others.
Partner relationship management
 In addition to being good at customer relationshi
p management, marketers must also be good at p
artner relationship management—working clo
sely with others inside and outside the company t
o jointly bring more value to customers.
Partner relationship management
 In today’s more connected world, every functiona
l area in the organization can interact with custo
mers. The new thinking is that—no matter what y
our job is in a company—you must understand m
arketing and be customer focused.
Partner relationship management
 The supply chain describes a longer channel, stret
ching from raw materials to components to final
products that are carried to final buyers.
 Through supply chain management, companies to
day are strengthening their connections with part
ners all along the supply chain.
Capturing Value from Customers

 The final step involves capturing value in return i

n the form of sales, market share, and profits. By
creating superior customer value, the firm creates
highly satisfied customers who stay loyal and bu
y more. This, in return, means greater long-run re
turns for the firm.
Creating Customer Loyalty and Ret
ention
 Customer lifetime value is the value of the entir
e stream of purchases that the customer would m
ake over a lifetime of patronage
Growing Share of Customer
 Beyond simply retaining good customers to capture
customer lifetime value, good customer relationshi
p management can help marketers increase their sh
are of customer—the share they get of the custome
r’s purchasing in their product categories.
Building Customer Equity
 Customer equity is the total combined customer
lifetime values of all of the company’s current an
d potential customers.
Building the Right Relationships wi
th the Right Customers
 Right relationships with the right customers invol
ves treating customers as assets that need to be m
anaged and maximized.
 Different types of customers require different rela
tionship management strategies.
The Changing Marketing Landscape
 This section have five major developments:

The Changing
Marketing The Digital Age
Landscape

The Growth of Not-

Rapid Globalization
for-Profit Marketing

Sustainable Marketing
─ The Call for More
Social Responsibility
The Changing Economic Environment
 The Great Recession caused many consumers to rethink t
heir spending priorities and cut back on their buying.
 In adjusting to the new economy, companies and slash pri
ces in an effort to coax more frugal customers into openin
g their wallets.
 The challenge is to balance the brand’s value proposition
with the current times while also enhancing its long-term
equity.
The Digital Age
 The digital age has provided marketers with exciting new
ways to learn about and track customers and create produ
cts and services tailored to individual customer needs.
 Online marketing is now the fastest-growing form of mar
keting.
The Growth of Not-for-profit Marketing
 In recent years, marketing has also become a major part o
f the strategies of many not-for-profit organizations, such
as colleges, hospitals, museums, zoos, symphony orchestr
as, and even churches.
 Government agencies have also shown an increased inter
est in marketing.
Rapid Globalization
 Today, almost every company, large or small, is touched i
n some way by global competition.
 Managers in countries around the world are increasingly t
aking a global, not just local, view of the company’s indu
stry, competitors, and opportunities.
Sustainable Marketing ─ The Call for Mo
re Social Responsibility
 As the worldwide consumerism and environmentalism m
ovements mature, today’s marketers are being called on t
o develop sustainable marketing practices.
 Corporate ethics and social responsibility have become h
ot topics for almost every business.
So, What Is Marketing? Pulling It All Tog
ether
The End