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Chapter 1 Marketing : Creating and Capturing Customer Value

What is Marketing? Marketing is the activity, set of institutions, and processes for creating, communicating, delivering, and exchanging offerings that have value for customers, clients, partners, and society at-large. More simply: Marketing is the delivery of customer satisfaction at a profit .

What Motivates a Consumer to Take Action? Needs – NOT invented by marketers. They are a basic parts of human makeup: states of felt deprivation including physical needs for food, social needs for belonging and individual needs for self-expression. E.g. I am thirsty. Wants - form that a human need takes as shaped by culture and individual personality. E.g. I want a coca-cola. Demands - human wants backed by buying power. E.g. I have money to buy a coca-cola.

Marketing Offers Products - anything that can be offered to a market to satisfy a need or want. Products also include: Persons, Places, Organizations, Activities, and Ideas. Services - activities or benefits offered for sale that are essentially intangible and don’t result in the ownership of anything. Examples: banking, airlines, haircuts, and hotels. Marketing Offer : Some combination of products, services, information, Or experiences offered to a market to satisfy a need or want.

Experiences – marketers look beyond the attributes of the products and services they sell. They create brand meaning and brand experiences for customers. Coca-Cola Nike/Nike Town Disney World Marketing Offers (Cont.)

Market “ Market” in marketing term: A set of all actual and potential buyers of a product or service. “ Market” in financial term: What is the“commodity market”?

Marketing Management Philosophies(1) Production Concept Demand exceeds supply Consumers favor products that are available and highly affordable Improve production and distribution Run a risk of focusing too narrowly on their own operation Texas Instrument: digital watch

Marketing Management Philosophies(2) Product Concept Increasing competition Consumers favor products that offer the most quality, performance, and innovative features Continuous product improvement lead to Marketing Myopia Railroad: trains vs. transportation

Marketing Management Philosophies(3) Selling Concept Over capacity Consumers will not buy enough of the organization’s products unless the organization undertake a large-scale promotion/selling Track down prospects and selling them on product benefits Sell what they make rather than what the market want focus on transactions not long-term relationship Unsought goods: encyclopedias, insurance

Marketing Management Philosophies(4) Marketing Concept Focuses on needs/ wants of target markets & delivering satisfaction more effectively & efficiently than competitors Total customer satisfaction Procter & Gamble, Marriot, Nordstrom, L.L.Bean Overlook conflicts between consumer short-run wants and long-run welfare

Selling vs. Marketing Concepts Contrasted Starting Point Focus Means Ends The Selling Concept: inside-out The Marketing Concept: Outside-in Factory Existing Products Selling and Promoting Profits through Sales Volume Market Customer Needs Integrated Marketing Profits through Customer Satisfaction

Marketing Management Philosophies (5) Society (Human Welfare) Consumers (Wants) Company (Profits) Societal Marketing Concept Fast-food industry: high in fat and salt; packages lead to waste & pollution Johnson & Johnson: supporting many community and employee programs recalled cyanide-laced Tylenol costing $240 million

How do Consumers Obtain Products and Services? Exchanges - act of obtaining a desired object from someone by offering something, such as money, another good, or a service, in return. Transactions - trade of values between parties: one party gives X to another party and gets Y in return. A transaction is marketing’s unit of measurement. Relationship Marketing – the process of creating, maintaining, and enhancing strong, value-laden relationships with customers and other stakeholders.

Relationship Building Blocks Customers – refer to both end users and marketing intermediaries. Customer Perceived Value - difference between the value the customer gains from owning and using a product and the cost of obtaining the product. (perceived benefits – perceived costs) Customer Satisfaction - depends on the product’s perceived performance in delivering value relative to a buyer’s expectations. (perceived performance- perceived expectations)

Customer Relationship Management The overall process of building and maintaining profitable customer relationships by delivering superior customer value and satisfaction. Customer Relationship Levels Basic Relationships with Low –margin customers Full Partnership with high-margin customers Customer Loyalty and Retention Programs Adding financial benefits: frequent flier program Adding financial benefits + social benefits: “Swatch: the Club” Adding financial benefits + social benefits + Structural Ties: FedEx

From Database Marketing to Customer Relationship Management (CRM) Customer Relationship Management has been defined narrowly as a customer data management activity. Attract new customers, and create transactions with them Retain current customers, and build profitable, long-term relationships with current customers Customer profitability analysis to weed out losing customers and target winning ones. Connecting with customers more directly.

Customer Relationship Groups Short-term Customers Long-term Customers High- Profit Low- Profit Butterflies Good fit between company’s offerings and customers’ needs; High profit potential True Friends Good fit between company’s offerings and customers’ needs; Highest profit potential Strangers Little fit between company’s offerings and customers’ needs; Lowest profit potential Barnacles Limited fit between company’s offerings and customers’ needs; Low profit potential

Return on Marketing Investment (ROMI) from reading: “Drive ROMI by Tying Brand Equity to Consumers” Financial performance Market share Profits Sales Customer Purchase Behavior New purchase Re-purchase Segmentation Brand Equity Awareness Attitude Perceived quality Loyalty Associations Marketing Activities Rebate Ad Promotion Sponsorship Customer Services New Products Before

Partner Relationship Marketing Working closely with partners in other company departments and outside the company to jointly bring greater value to customers. Every employee must be customer focused. Supply chain management Strategic alliances

Modern Marketing System Suppliers End User Market Marketing Intermediaries Competitors Company (Marketer) Environment Environment

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

New Marketing Challenges Emerging Challenges Nonprofit Marketing New Marketing Landscape & Information Technology Ethical Concerns Globalization Changing World Economy

Corporate Social Responsibility (CSR) What corporate actions can be qualified as CSR? What are the motivations that motivate companies to behave as good corporate citizens? How to evaluate the result of CSR? What are the two tests of CSR? What are the four types of CSR? Do you agree with the following statements? “ Corporate philanthropy is charity with other people’s money.” “ Multinational companies should be responsible for their foreign workers’ benefits.” What is the stance/position of this article?

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