Principles of Marketing

Kotler and Armstrong

Seventeenth Edition

Chapter 1:

Marketing

Creating Customer Value

and Engagement
 Learning Objective
Objective 1: Define marketing & outline the steps in the marketing process.
What is Marketing?

Objective 2: Explain the importance of understanding the marketplace & customers &
identifying the 5 core marketplace concepts.
Understanding the Marketplace & Customer Needs

Objective 3: Identify the key elements of a customer-driven marketing strategy &

discuss the marketing management orientations that guide marketing strategy.
Designing a Customer-Driven Marketing Strategy
Preparing an Integrated Marketing Plan & Program

Objective 4: Discuss CRM & identify strategies for creating value for customers &
capturing value from customers in return.
Building Customer Relationships
Capturing Value from Customers

Objective 5: Describe the major trends and forces that are changing the marketing
landscape in this age of relationships.
The Changing Marketing Landscape
 What Is Marketing?
Marketing Defined

Marketing is a process by which

companies create value for customers
and build strong customer relationships
in order to capture value from
customers in return.
 What Is Marketing?
Marketing Defined

• The twofold goal of marketing is to:

 attract new customers by promising
superior value
 grow current customers by delivering
satisfaction
• Sound marketing is successful key.
• Marketers want to become a part of your
life and enrich your experiences with their
brands—to help them live their brands.
What Is Marketing?
The Marketing Process
1. Understanding the Marketplace and
Customer Needs
5 Core Customer & Marketplace Concepts:
• Needs, wants, and demands
• Marketing offering (products, services, &
experiences)
• Value & satisfaction
• Exchanges & relationships
• Markets
1. Understanding the Marketplace and
Customer Needs
Customer Needs, Wants, and Demands

Needs • States of deprivation

• Form that needs take

Wants • shaped by culture and
individual personality

• Wants that are backed by

Demands buying power
1-4
 Question

Q1) How marketers learn to understand their customers’

needs, wants, and demand?

Q2) How marketers satisfy consumers’ needs & wants?

 1. Understanding the Marketplace and
Customer Needs
Market Offerings – Products, Services, and Experiences

• Market offerings are some

combination of products,
services, information, or
experiences offered to a
market to satisfy a need or
want.
• Marketing myopia is
focusing only on existing
wants and losing sight of
underlying consumer
needs.
1. Understanding the Marketplace and
Customer Needs
Customer Value and Satisfaction

Customers
• Value and
satisfaction

Marketers
• Set the right
level of
expectations
1. Understanding the Marketplace and
Customer Needs
Exchanges and Relationships

Exchange is the fact of obtaining a

desired object from someone by
offering something in return.

Marketing actions try to create,

maintain, and grow desirable exchange
relationships.
1. Understanding the Marketplace and
Customer Needs
Markets

A market is set of actual and potential

buyers.

Consumers market when they:

• search for products
• interact with companies to obtain information
• make purchases
1. Understanding the Marketplace and
Customer Needs
Markets
 2. Designing a Customer Value-Driven
Marketing Strategy
Selecting Customers to Serve

Marketing management is the art and science of

choosing target markets and building profitable
relationships with them.

• What customers will we serve (what’s our target

market)?
• How can we best serve these customers (what’s
our value proposition)?
 2. Designing a Customer Value-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.

Marketing management = Customer mgmt +

demand mgmt
 2. Designing a Customer Value-Driven
Marketing Strategy
Choosing a Value Proposition

A brand’s value
proposition is the
set of benefits or
values it promises
to deliver to
customers to satisfy
their needs. Twitter, Inc.
 2. Designing a Customer Value-Driven
Marketing Strategy
Marketing Management Orientations

Societal
Production Product Selling Marketing
Marketing
concept concept concept concept
concept
 2. Designing a Customer Value-Driven
Marketing Strategy
Marketing Management Orientations
Production concept:

Consumers will favor products that are available and

highly affordable.

Management focuses on improving production and

distribution efficiency.
 2. Designing a Customer Value-Driven
Marketing Strategy
Marketing Management Orientations
Suitable for highly competitive & price-sensitive
market.

Disadvantages:
• Market myopia.
• Focus too narrow on operation & losing sight of the
real objective.
 2. Designing a Customer Value-Driven
Marketing Strategy
Marketing Management Orientations

Product concept:
Consumers favor products that offer the most
quality, performance, and features.

The focus is on continuous product improvements.

 2. Designing a Customer Value-Driven
Marketing Strategy
Marketing Management Orientations

Selling concept:
Consumers will not buy enough of the firm’s
products unless the firm undertakes a large-scale
selling and promotion effort.

Aim: sell what the company makes rather than

making what the market wants.
 2. Designing a Customer Value-Driven
Marketing Strategy
Marketing Management Orientations
Suitable for unsought goods
Sellers must be good at tracking prospects & focus on selling
product benefits.
Marketing strategy : Focus on create sales transaction rather
than building long-term relationship.

Assumption:
• Buyer will like the products
• Customers will forget their disappointment & buy it again
later
2. Designing a Customer Value-Driven
Marketing Strategy
Marketing Management Orientations
 2. Designing a Customer Value-Driven
Marketing Strategy
Marketing Management Orientations

Marketing concept:
Know the needs and wants of the target markets
and deliver the desired satisfactions better than
competitors.

The job is not to find the right customers for your

product but to find the right products for your
customers.
2. Designing a Customer Value-Driven
Marketing Strategy
Marketing Management Orientations

Societal marketing:
The company’s
marketing decisions
should consider
consumers’ wants,
the company’s
requirements,
consumers’ long-run
interests, and
society’s long-run
interests.
 2. Designing a Customer Value-Driven
Marketing Strategy
Marketing Management Orientations
Marketing strategy:
Deliver value to customers in a way that maintains or
improves both the consumer’s and society’s well-being.

Focus: sustainable marketing, socially and environmentally

responsible marketing.

Shared value concept:

• Focus on creating economic value in a way that also
creates value for society.
3. Preparing an Integrated Marketing Plan and
Program

The marketing mix is comprised of a set of tools

known as the four Ps:
• product
• price
• promotion
• place
Integrated marketing program—a comprehensive plan
that communicates and delivers intended value
3. Preparing an Integrated Marketing Plan and
Program
To deliver on its value proposition:
• 1st P – create a need-satisfying market offering
(product)
• 2nd P – decide how much it will charge for the
offering (price)
• 3rd P – make the offering available to the target
customers (place)
• 4th P – engage target consumers, communicate the
offering, persuade about offer’s benefits
(promotion)
 4. Building Customer Relationships

Customer Relationship Management

Customer relationship management is the overall

process of building and maintaining profitable
customer relationships by delivering superior
customer value and satisfaction.

Deal with all aspects of acquiring, engaging, &

growing customers.
4. Building Customer Relationships
Customer Relationship Management
Relationship Building Blocks
Customer- Customer
perceived value satisfaction

• The difference • The extent to

between total which perceived
customer performance
perceived matches a
benefits and cost buyer’s
of a marketing expectations
offer relative to
competing
offers.
 Quiz

Performance > Expectation = ___________

Performance = Expectation = ___________

Performance < Expectation = ___________

Dissatisfied; Satisfied; Delighted

 4. Building Customer Relationships
Customer Relationship Management
Customer Relationship Levels and Tools

Frequency
Basic Relationships – Full Partnerships
Marketing
low-margin – high-margin
Programs – reward
customers customers
customers

Club Marketing
brand-building Sales representatives Programs–
advertising, websites, work closely with large members special
and social media retailers
benefits and
communities
 4. Building Customer Relationships
Engaging Customers
Customer-Engagement and Today’s Digital and Social Media

Customer-Engagement Marketing makes the brand a

meaningful part of consumers’ conversations and lives by
fostering direct and continuous customer involvement in
shaping brand conversations, experiences, and community.
 4. Building Customer Relationships
Engaging Customers
Consumer-Generated Marketing
Growing form of customer-engagement marketing.
Brand exchanges created by consumers themselves—
both invited and uninvited
Consumers are playing an increasing role in shaping
their own brand experiences and those of other
consumers.
 4. Building Customer Relationships

Partner Relationship Management

Partner relationship management involves working

closely with partners in other company
departments and outside the company to jointly
bring greater value to customers.
 5. 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.
 5. Capturing Value from Customers
Growing Share of Customer
Share of customer is the portion of the customer’s
purchasing that a company gets in its product
categories.

Offer great variety to current customers, cross-sell

& up-sell to existing customers.

Example:
 5. Capturing Value from Customers
Building Customer Equity

Customer equity is the

total combined customer
lifetime values of all of
the company’s current
and potential customers.

Measure of the future

value of the company’s Managing customer equity: To increase customer
equity, Cadillac is making the classic car cool again
customer base. among younger buyers, encouraging consumers to
“Dare Greatly.”
 5. Capturing Value from Customers
Building Customer Equity
Building the Right Relationships with the Right Customers

FIGURE 1.5
Customer
Relationship
Groups
 Butterflies
• High profit, S-T loyalty
• Good fit between company’s offering & their
needs.
• Difficult to convert into loyal customers.
•Strategy:
i) create satisfying & profitable transaction
ii) capturing as much businesses as possible
iii) move on & stop investing on them
Strangers
• Low profit, S-T loyalty
• little fit between company’s offering & their
needs.
•Strategy:
i) don’t invest anything in them
ii) make money on every transaction
True Friends
• High profit, L-T loyalty
• Strong fit between company’s offering &
their needs.
• Strategy:
i) Continuous investment, delight, retain &
grow them.
• Convert into true believers.
Barnacles
• Low profit, L-T loyalty
• limited fit between company’s offering &
their needs.
• The most problematic customers.
• Strategy:
i) Improve their profitability – sell more to
them
ii) Raising their fees
iii) Reduce service to them
iv) ‘fired’ if unable to generate profit
 5. Capturing Value from Customers
• Different types of customers require different
engagement and relationship management
strategies.

• The goal is to build the right relationships with

the right customers.
So, What Is Marketing? Pulling It All Together