Chapter One

Marketing: Creating and Capturing Customer Value

Creating and Capturing Customer Value

Topic Outline
What Is Marketing? Understand the Marketplace and Customer Needs Designing a Customer-Driven Marketing Strategy Preparing an Integrated Marketing Plan and Program Building Customer Relationships Capturing Value from Customers The Changing Marketing Landscape

What Is Marketing?
Marketing is a process by which companies create value for customers and build strong customer relationships to capture value from customers in return

What Is Marketing?
Marketing is a process by which companies create value for customers and build strong customer relationships to capture value from customers in return

Understanding the Marketplace and Customer Needs

Core Concepts

Customer needs, wants, and demands Market offerings Value and satisfaction Exchanges and relationships Markets

Understanding the Marketplace and Customer Needs

Customer Needs, Wants, and Demands

Understanding the Marketplace and Customer Needs

Customer Needs, Wants, and Demands Given their wants and resources, people demand products or services with benefits that add up to the most value and satisfaction The best marketing companies go to great lengths to learn and understand their customers' needs, wants and demands

Understanding the Marketplace and Customer Needs

Needs and wants are fulfilled through MARKET OFFERINGS Case in Point: The Dawn News advertisement Strengthening the pillar of good governance upon which rests the future of an enlightened state.... The offering here is reliable news which has a comprehensive relationship with good governance and and enlightened state

Understanding the Marketplace and Customer Needs

Needs and wants are fulfilled through MARKET OFFERINGS Case in Point: The Dawn News advertisement Strengthening the pillar of good governance upon which rests the future of an enlightened state.... The offering here is reliable news which has a comprehensive relationship with good governance and and enlightened state

Understanding the Marketplace and Customer Needs

Market offerings are some combination of products, services, information, or experiences offered to a market to satisfy a need or want. Eg. Banking, air-travel, hotel stays, tourism, etc. Marketing myopia is focusing only on existing wants and losing sight of underlying consumer needs. Eg. Lack of Innovation: Tape recorders Music systems Walkman CDman iPod Live streaming music on the internet.

Understanding the Marketplace and Customer Needs

Customer Value and Satisfaction Expectations
Customers form expectations about value and satisfaction that various market offerings will deliver and buy accordingly
Expectation creation about value and satisfaction by marketers must be judiciously decided

Satisfied customers buy again and again and spread a positive word of mouth
Dissatisfied customers switch to competitors and disparage the product to others

Understanding the Marketplace and Customer Needs

Customer Value and Satisfaction Expectations
Too low expectations satisfy those who consume but not attract new consumers Too high expectations Customers / Consumers might be disappointed

Understanding the Marketplace and Customer Needs

Exchange is the act of obtaining a desired object from someone by offering something in return A marketer tries to bring about a response to some market offering. The response may be more than buying or trading products and services Political candidate Votes

Religious group Memberships

Musical troupe audience

Social action group acceptance (Jan Lokpal, Narmada Bachao Andolan)

Marketing occurs when people decide to satisfy needs and wants through exchange relationships

Understanding the Marketplace and Customer Needs

Markets are the set of actual and potential buyers of a product
Company SUPPLIERS Competitors Marketing Intermediaries CONSUMERS

Major Environmental Forces (Demographic, economic, technological, Politico-legal, socio-cultural)

Assignments
1. Visit website of Maruti Udyog Ltd. And answer the following questions:
A. What needs, wants and/or demands is Maruti attempting to fill
B. Describe their marketing offers C. Describe the relationship that they have with their customers D. What are their markets

2. Visit India website of eBay and answer the following questions

A. How is eBay providing value to its customers B. Describe the relationships they have with their customers C. What are their markets

Designing a Customer-Driven Marketing Strategy

Marketing management is the art and science of choosing target markets and building profitable relationships with them
What customers will we serve? How can we best serve these customers?

Designing a Customer-Driven Marketing Strategy

Selecting Customers to Serve

Market segmentation refers to dividing the markets into segments of customers

Target marketing refers to which segments to go after

Designing a Customer-Driven Marketing Strategy

Selecting Customers to Serve
Demarketing is marketing to reduce demand temporarily or permanently; the aim is not to destroy demand but to reduce or shift it

(Amusement Parks, Goa in the Rains)

Designing a Customer-Driven Marketing Strategy

Choosing a Value Proposition
The value proposition is the set of benefits or values a company promises to deliver to customers to satisfy their needs BMW promises the ultimate driving machine Indica V2 promises more car per car Such value propositions differentiate one brand from the other

Class Assignment
In groups of 4 develop a marketing plan for a company producing and marketing organic food. Who is your target market How will you enable customers to get the best value Develop value proposition of your offering for this target market

Designing a Customer-Driven Marketing Strategy

Marketing Management Orientations

Designing a Customer-Driven Marketing Strategy

Marketing Management Orientations
Production concept is the idea that consumers will favor products that are available or highly affordable One of the oldest orientations that guides sellers

Useful in highly competitive and price sensitive markets (PC Markets of Lenovo in China)
This concept can lead to marketing myopia

Companies adopting this orientation run a major risk of focussing too narrowly on their own operations and losing sight of satisfying customer needs and building customer relationships

Designing a Customer-Driven Marketing Strategy

Marketing Management Orientations
Product concept is the idea that consumers will favor products that offer the most quality, performance, and features. Organization should therefore devote its energy to making continuous product improvements. Here again, focus on the product may lead to marketing myopia Even improved products might not sell if unless they are designed, packaged and priced attractively.

Designing a Customer-Driven Marketing Strategy

Marketing Management Orientations
Selling concept is the idea that consumers will not buy enough of the firms products unless it undertakes a large scale selling and promotion effort

Such orientation is for products which are not sought popularly. (Insurance)
Here prospects have to be tracked down and products sold on benefits

The flaw is that this orientation focusses on sales transactions than on building long-term, profitable customer relationships

Designing a Customer-Driven Marketing Strategy

Marketing Management Orientations
Marketing concept is the idea that achieving organizational goals depends on knowing the needs and wants of the target markets and delivering the desired satisfactions better than competitors do Instead of a product-centered make & sell philosophy, the marketing concept is a customer-centered sense and respond philosophy The marketing concept starts with a well defined market, focusses on customer needs and integrates all marketing activities that affect customers In turn, it yields profits by creating lasting relationships with the right customers based on customer value and satisfaction

Designing a Customer-Driven Marketing Strategy

Marketing Management Orientations
Societal marketing concept is the idea that a company should make good marketing decisions by considering consumers wants, the companys requirements, consumers long-term interests, and societys long-run interests
Society (Human Welfare)

Societal Marketing Concept Consumers (Satisfaction) Company (Profits)

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 includes product, price, promotion, and place.
To deliver on its value proposition, the firm must first create a need satisfying market oferring (Product) It must then decide how much it will charge for the offering (Price) and how it will make the offering available to target customers (Place)

Finally, it must must communicate with target customers about the offering and persuade them of its merits (Promotion)

Preparing an Integrated Marketing Plan and Program

Integrated Marketing Communication (IMC)program is a comprehensive plan that communicates and delivers the intended value to chosen customers. Communication channels include: Advertising, Personal selling, Public Relations (PR), Direct Marketing & Sales promotions

Building Customer Relationships

Customer Relationship Management (CRM)
CRM is the most important concept of modern marketing The overall process of building and maintaining profitable customer relationships by delivering superior customer value and satisfaction It deals with all aspects of acquiring, keeping & growing customers Relationship building blocks: CUSTOMER VALUE & SATISFACTION

Building Customer Relationships

Relationship Building Blocks: Customer Value and Satisfaction
The key to building lasting customer relationships is to create superior customer value and satisfaction

Customer value: This is the customer's evaluation of the difference between all the benefits and all the costs of a market offering relative too those of competing offers.
Customers, often, do not judge values and costs accurately or objectively

Customers act on Customer Perceived Value

Building Customer Relationships

Relationship Building Blocks: Customer Value and Satisfaction

Building Customer Relationships

Customer Relationship Levels and Tools

Building Customer Relationships

The Changing Nature of Customer Relationships
Relating with more carefully selected customers uses selective relationship management to target fewer, more profitable customers Relating more deeply and interactively by incorporating more interactive two way relationships through blogs, Websites, online communities and social networks

Building Customer Relationships

Partner relationship management involves working closely with partners in other company departments and outside the company to jointly bring greater value to customers

Building Customer Relationships

Partner Relationship Management
Partners inside the company is every function area interacting with customers
Electronically Cross-functional teams

Partners outside the company is how marketers connect with their suppliers, channel partners, and competitors by developing partnerships

Building Customer Relationships

Partner Relationship Management
Supply chain is a channel that stretches from raw materials to components to final products to final buyers
Supply management Strategic partners

Strategic alliances

Capturing Value from Customers

Creating Customer Loyalty and Retention

Customer lifetime value is the value of the entire stream of purchases that the customer would make over a lifetime of patronage

Capturing Value from Customers

Growing Share of Customer

Share of customer is the portion of the customers purchasing that a company gets in its product categories

Capturing Value from Customers

Customer equity is the total combined customer lifetime values of all of the companys customers

Capturing Value from Customers

Building Customer Equity
Building the right relationships with the right customers involves treating customers as assets that need to be managed and maximized Different types of customers require different relationship management strategies Build the right relationship with the right customers

The Changing Marketing Landscape

Major Developments