Sei sulla pagina 1di 64



Chapter 01
1. Define marketing and the marketing process.

2. Explain the importance of understanding customers and identify the

five core marketplace concepts.

3. Identify the elements of a customer-driven marketing strategy and

discuss the marketing management orientations.

4. Discuss customer relationship management and creating value for

and capturing value from customers.

5. Describe the major trends and forces changing the marketing

“Process by which companies create value for customers and build
strong customer relationships in order to capture value from customers
in return”
“Managing profitable customer relationships”

The twofold goal of marketing is to:

1. Attract new customers by promising superior value
2. To keep & grow current customers by delivering satisfaction
 Marketing is based on thinking about the business in terms of
customer needs and their satisfaction.

 Marketing differs from selling because “selling concerns itself with

the tricks and techniques of getting people to exchange their cash for
your product”
Wal-Mart has become the world’s second largest retailer - & one of
the world’s largest company – delivering on its promise, “save money,
live better”
 offers all sort household products

 Disney theme park offers lifetime experience to its customers

 Walt Disney world resort offers various theme & water parks

 Apple fulfills its motto to “Think Different” with customer driven

innovation that captures customer imaginations & loyalty. Its
successful iPod grabs more than 70 % of the music player market.

 Both for-profit firm and non-for-profit firms go for marketing

 For-profit firm includes Google, Toyota, Apple etc.
 Non-for-profit firm includes colleges, hospitals, museums and even
religious institutions/organizations.
 Non-for-profit organization is a type of organization that does not
earn profits for its owners. All of the money earned by or donated to
a not for profit organization is used in pursuing the organization’s
 Not for profit organizations are charities or other types of public
service organizations.
Example: Edhi foundation, Aurat foundation, Darun sakun
 One of the advantage of a non profit organizations is “rewarding
work”. Many non profit organizations have a positive impact on the
health and welfare of people. They do good works that are
compatible with the religious and social values of individuals who
want to help others and become involved in improving their

 One of the disadvantage of a non profit organization is “low pay”.

Low pay constrained by limited financial resources, many non profit
organizations offers below average to low salaries
1. Understand the marketplace and customer needs and wants
2. Design a customer-driven marketing strategy
3. Construct a marketing program that delivers superior value
4. Build profitable relationships and create customer delight
 Create value for customers & build customer relationship
5. Capture value from customers to create profits and customer
 Capture value from customers in return

5 Core Concepts  State of felt deprivation
 Needs, wants, and demands  Human have many complex
 Marketing offers: including needs including physical
products, services and need for clothing, warmth
experiences and safety needs, social
 Value and satisfaction needs for belonging and
affection, and individual
 Exchange, transactions and
relationships needs for knowledge & self
 Markets
 Marketers don’t create need,
they are basic part of human

5 Core Concepts
 Needs, wants, and demands Wants
The form of needs shaped
 Marketing offers: including
by culture and individual
products, services and
experiences personality.
 Value and satisfaction
 Exchange, transactions and Human wants which are
backed by buying power
 Markets

5 Core Concepts How would you differentiate

 Needs, wants, and demands between needs, wants &
 Marketing offers: including demands?
products, services and  Transportation is a human need
experiences  Car becomes human want
 Value and satisfaction  Demand is backed up by buying
 Exchange, transactions and power .
 Mercedes becomes a demand
 Markets which adds up to the most value &

5 Core Concepts
• Outstanding marketers
 Needs, wants, and demands go to great length to
 Marketing offers: including learn about and
products, services and understand their
experiences customers’ needs,
 Value and satisfaction wants and demands.
 Exchange, transactions and
relationships • They train salespersons
 Markets and other frontline
personnel to be on the
outlook for unfulfilled
customer needs.

In some companies, people

5 Core Concepts at all levels including top
 Needs, wants, and demands management, stay close to
customers to understand
 Marketing offers: including
products, services and
experiences • Example: at pizza hut,
in addition of customer
 Value and satisfaction
survey about their
 Exchange, transactions and quality needs,
analyzing customer
 Markets complaints and
studying customer
service records, top
executives routinely
work in outlets to gain
better insights into
customer needs

5 Core Concepts
 Needs, wants, and demands Marketing offerings
 Marketing offers: including  Consumers needs and wants
products, services and are fulfilled through market
experiences offerings
 Value and satisfaction
 Exchange, transactions and “Some combination of
relationships products, services,
 Markets information or
experiences offered to
the market to satisfy a
need or want”

5 Core Concepts
 Needs, wants, and demands Product: Tangible / physical
 Marketing offers: including goods
products, services and Services: Intangible & do not
experiences result in the ownership of
 Value and satisfaction anything but experiences. E.g.
banking, hotel stays, air travel
 Exchange, transactions and
relationships etc.
Experience: Tourism, the
 Markets
marketing offering is an
entire travel experience

5 Core Concepts
 Needs, wants, and demands Idea: Besides promoting
 Marketing offers: including its TV news channel,
products, services and DawnNews markets the
experiences idea that an enlightened
 Value and satisfaction state needs good
 Exchange, transactions and governance
relationships Also involves marketing
 Markets of ideas such as awareness
about AIDS

5 Core Concepts Marketing Myopia

“The mistake of paying more
 Needs, wants, and demands
attention to the specific
 Marketing offers: including products a company offers than
products, services and
to the benefits and the
experiences produced by these
 Value and satisfaction products”
 Exchange, transactions and Smart marketers look beyond
relationships the attributes of products &
 Markets services they sell, they create
brand experience for their
Example. Laptops

5 Core Concepts Kodak was torn between going
 Needs, wants, and demands digital and sacrificing money on
 Marketing offers: including camera film or staying with films
products, services and and getting left behind in digital
experiences technology
 Value and satisfaction
 Exchange, transactions and In 1976 had a 89% market share of
relationships photographic film sales in the
United States.
 Markets
Kodak began to struggle
financially in the late 1990s as a
result of the decline in sales of
photographic film

 2007 was the most recent year in which

5 Core Concepts
the company made a profit. As part of a
 Needs, wants, and demands turnaround strategy, Kodak focused on
 Marketing offers: including digital photography and digital printing
products, services and and attempted to generate revenues
 In February 2012, Kodak announced
 Value and satisfaction that it would cease making digital
 Exchange, transactions and cameras, pocket video cameras and digital
relationships picture frames and focus on the corporate
 Markets digital imaging market
In terms of sales Kodak is a major player
in the graphics communication industry
with annual sales in excess of $5 billion

5 Core Concepts
Value & satisfaction
 Needs, wants, and demands How do consumer choose
 Marketing offers: including among many marketing
products, services and offerings?
experiences Customers form expectation
 Value and satisfaction about the value &
 Exchange, transactions and satisfaction that various
relationships market offering will deliver
 Markets & buy accordingly. Satisfied
customers rebuy whereas
dissatisfied ones switch

5 Core Concepts Customer value:

“Amount of benefit a
 Needs, wants, and demands customer will get from a
 Marketing offers: including service or a product
products, services and relative to its cost”
 Value and satisfaction Customer perceived
 Exchange, transactions and value:
relationships “customer evaluation of
 Markets the difference between all
the benefits and all the
costs of a market offering
relative to those of
competing offers”

5 Core Concepts
 Needs, wants, and demands
FedEx customers gain
 Marketing offers: including many benefits.
products, services and
experiences Fast and reliable package
delivery. Customers might
 Value and satisfaction
also retain some status and
 Exchange, transactions and image value. Using FedEx
relationships usually makes both the
 Markets package sender and the
receiver feel more

5 Core Concepts Value & satisfaction

Marketers must be careful to
 Needs, wants, and demands
set the right level of
 Marketing offers: including expectations. If they set
products, services and
expectations too high, buyers
will be disappointed whereas if
 Value and satisfaction they set expectations too low,
 Exchange, transactions and they may satisfy those who buy
relationships but fail to attract enough
 Markets buyers.
 Value & satisfaction are the
building blocks for developing
& managing customer

5 Core Concepts
Exchanges & Relationship
 Needs, wants, and demands “The act of obtaining a desired object
 Marketing offers: including from someone by offering something
products, services and in return”
 Marketer tries to bring about a
 Value and satisfaction
response to some market
 Exchange, transactions and offering. The response maybe
relationships more than simply buying or
 Markets trading products & services.

5 Core Concepts Exchanges & Relationships

• Marketing consist of
 Needs, wants, and demands
actions taken to build and
 Marketing offers: including maintain desirable exchange
products, services and
relationships with target
audiences involving a
 Value and satisfaction product, service, idea or
 Exchange, transactions and other object.
relationships • The goal is not only to
 Markets attract new customers but
also retain the existing
customers since marketers
want to build strong
relationships by delivering
superior customer value

5 Core Concepts
Relationship marketing
 Needs, wants, and demands “Process of creating,
 Marketing offers: including maintaining and
products, services and enhancing strong, value
experiences laden relationships with
 Value and satisfaction customers and other
 Exchange, transactions and stakeholders”
relationships “Maintain good
 Markets relationships with
valuable customers and
profitable transactions
will continue”

5 Core Concepts
 Needs, wants, and demands
“Set of all actual and
 Marketing offers: including potential buyers of a
products, services and
experiences product or service”
• These buyers share a
 Value and satisfaction
particular need or want
 Exchange, transactions and that can be satisfied
relationships through exchange
 Markets relationships
• The concepts of
exchange and
relationships lead to the
concept of a market
1. Company & competitors research the market & interact with
customers to understand their needs.

2. They create & send their market offerings to the customers, either
directly or through marketing intermediaries. All of the parties in
the system are affected by major environmental forces including
demographic, economic, physical, technological, political, legal,
social, cultural etc.

 Relationship between all the parties must be developed & managed.

 Company’s success at building profitable relationships depends not

only on its own actions but also on how well the entire system serves
the needs of the final consumers

 Example: Wal-Mart cannot fulfill its promise of low prices unless its
suppliers provide merchandise at low costs.

Once a company fully understands the consumers and the marketplace,

marketing management can design a customer driven marketing

“Marketing management is the art and science of choosing target

markets and building profitable relationships with them”

• To design a winning marketing strategy, the marketing manager must

answer two important questions:
1. What customer will we serve ( what’s our target market)?
2. How can we serve these customers best (what’s our value
1. Selecting customers to serve
The company must decide who it will serve by dividing the entire
market into segments of customers (market segmentation) and selecting
which segments it will go after (target marketing).
Important fact!!
Marketers know that they cannot serve all the customers in every way,
because by doing so they might not serve all the customers well.
Instead, the company only wants to select the customers it can serve
well & profitably.
 Some marketers may even seek fewer customers and reduced
demand. Example amusement parks are overcrowded in the summer
and many companies have trouble meeting demand during peak usage
periods therefore companies go for DE marketing, reducing customers
The aim of DE marketing is not to completely destroy demand, but
only to reduce or shift it to another time, or even another product.
2. Choosing a value proposition:
 The company must decide how it will serve its targeted customers –
how it will differentiate and position itself in the marketplace.
 Value proposition is the set of benefits or values a company
promises to deliver to consumers to satisfy their needs.
Example: Nokia – is connecting people –anyone, anywhere
Apple’s iPhone, “Touching is believing”.

 These value proposition differentiate one brand from another. They

answer the customer’s question “why should I buy your brand rather
than a competitor’s?”.

1. Product concept

2. Production concept

3. Selling concept

4. Marketing concept

5. Societal marketing concept

There are 5 alternative concepts under which organizations design and
carry out their marketing strategies which are as follows:

1. Production concept
“This concept holds that the consumers will favor products that
are available and highly affordable”
• Management should focus on improving production and
• Example: Computer maker Lenovo dominates the highly
competitive, price sensitive Chinese PC market through low labor
costs, high production efficiency and mass distribution
Disadvantage of production concept!!

 Although useful in some situations, the production concept can lead

to marketing myopia

“The mistake of paying more attention to the specific products a

company offers than to the benefits and the experiences produced by
these products”

 Companies adopting this orientation run a major risk of focusing too

narrowly on their own operations and losing sight of the real objective
– satisfying customer needs and building customer relationships
2. Product concept
This concept holds that consumer will favor products that offer the
most in quality, performance, and features.
 Management should focus on making continuous product
Disadvantage of product concept!!
 Although useful in some situations, focusing only on the company’s
products can lead to marketing myopia
“The mistake of paying more attention to the specific products a
company offers than to the benefits and the experiences produced by
these products”
Example: A mouse trap! Some manufacturers believe that if they can
“build a better mousetrap, the world will beat a path to their door.” but
some buyers maybe looking for a better solution to the mouse problem,
but not for a better mousetrap – for instance chemical spray,
exterminating service or something else that works better than the

Most importantly a better mousetrap will not sell unless the

manufacturer designs, packages and prices it attractively; place it in a
convenient distribution channels; bring it to the attention of people who
need it; and convinces buyers that it is a better product.
3. Selling concept
This concept holds that the consumer will not buy enough of the firm’s
products unless it undertake a large scale selling and promotion effort .
 It focuses on creating sales transactions rather than on building long
term, profitable customer relationships.
 The aim is to sell what the company makes rather than making what
the market wants.
Example: The selling concept is typically practiced with unsought
goods – those that buyers do not normally think of buying such as
insurance or blood donations.
4. Marketing concept
“The marketing management philosophy that holds that achieving
organizational goals depends on knowing the needs and wants of target
markets and delivering the desired satisfactions better than competitors
The Selling and the Marketing Concept
 The selling concept takes an inside-out perspective. It starts with the
factory, focuses on the company’s existing products and calls for heavy
selling and promotion to obtain profitable sales – it focuses on short
term sales with little concern about who buys or why.

Starting point Focus Means End

Factory Existing product selling Profit
5. The Societal Marketing Concept
This concept holds that a company should make good marketing
decisions by considering consumers’ wants, the company’s
requirements, consumers’ long run interests, and society’s long run
interest s.
It questions whether the pure marketing concept overlooks possible
conflicts between consumer short run wants & consumer long run
 The concept holds that marketing strategy should deliver value to
customers in a way that maintains or improves both the consumers’ and
the society of well being.
Problems when conflict arises!!
Example: Fast food offering unhealthy and oily food, resulting obesity.
Also that the products are wrapped in convenient packaging leading to
waste and pollution.
In satisfying short term consumer wants, the healthy successful fast-
food chains may be harming consumer health & causing environmental
problems in the long run.
 Company should balance the 3 considerations in setting their
marketing strategies as shown in Fig. 1.4

Society (Human welfare)

Consumers Company (Profits)

(Want satisfaction)

Examples of societal marketing concept

Johnsons & Johnsons
Its concern for social interest is summarized in a company document
called “ Our Credo” which stresses honesty, integrity and putting
people before profits. Under this credo J & J would rather take a big
loss than ship a bad batch of one of its products.
 Best example would be stated for in the case in which 8 people died
in 1982 from swallowing a capsule of Tylenol, a J & J brand. They
recalled all of its products & launched an information campaign
Body shop: cosmetic company, uses only vegetable based materials for
its products. It is also against animal testing.
Ariel: detergent manufactured by Proctor and Gamble. It runs special
fund raising campaigns. It also contributes part of its profits from every
bag sold to the development of the society.

 Marketer develops an integrated marketing program that will actually

deliver the intended value to target customers.

 The marketing program builds customer relationships by

transforming the marketing strategy into action.

 It consist of the firm’s marketing mix, the set of marketing tools the
firm uses to implement its marketing strategy

These marketing tools are classified into 4 broad groups, called the 4
Ps of marketing: product, price, place and promotion.

 Product: To deliver on its value proposition, the firm must first create
need satisfying market offering (product)
 Price: It must decide how much it must charge for the offering
 Place: How it will make the offering available to target consumers
 Promotion: It must communicate with target customers about the
offering and persuade them of its merits
CRM – Customer relationship management
“The overall process of building and maintaining profitable customer
relationships by delivering superior customer value and satisfaction”

Itdeals with all aspects of acquiring, keeping and growing customers.

Relationship building blocks: Customer value and satisfaction

Customer value
 A customer buys from the firm that offers the highest customer perceived
value – the customer’s evaluation of the difference between all the benefits
and all the costs of a market offering relative to those of competing offers.

Customer Satisfaction
 The extent to which a product’s perceived performance matches a
buyer’s expectations.
 If the product’s performance falls short of expectations, the customer is
dissatisfied. If performance matches expectations, the customer is satisfied.
If performance exceeds expectations, the customer is highly satisfied or
Customer Relationship Levels & Tools: Not all customers are equal
 A company with many low margin customers may seek to develop
basic relationships with them.
Example: Unilever Limited does not phone or call on all of its surf
consumers to get to know them personally. They create relationships
through brand-building advertising, sales promotions, and its Web site.
 In markets with few customers and high margins, seller wants to
create full partnership with key customers.
Many companies now offer frequency marketing programs that
reward customers who buy frequently or in large amounts.
Example: Airlines offers frequent flyer programs, hotels give room
upgrades to their frequent guests and supermarkets give percentage
discounts to “very important customers”
 Companies also sponsor club marketing programs that offer members
special benefits and create member communities.

Today’s companies are building deeper, more direct, and more lasting
relationships with more carefully selected customers

 Relating with more carefully selected customers

 Companies are now targeting fewer, profitable customers called
selective relationship management
 Once they target the profitable customers, firms can create attractive
offers and special handling to capture these customers and earn their
 If customers cost more to serve then they are worth it, then
companies, normally want to get rid of such customers

 Relating more deeply and interactively

 Websites and internet including e-mail, blogs, video sharing to
online communities and social networks such as MySpace, Face
book, YouTube and Second Life
 Though new communication tools create relationship building
opportunities for marketers, they also create challenges. They give
consumers greater power and control. Now consumers have more
brand information and choices
 Greater consumer control means that, in building customer
relationships, companies can no longer rely on marketing by
intrusion. They must practice marketing by attraction – creating
marketing offerings and messages that involve consumer rather than
interrupt them
 Consumer generated marketing – Marketing messages, ads and other
brand exchanges created by consumers themselves – both invited
and uninvited.
 E.g. Heinz have run contests for consumer generated commercials
that have been aired on national TV.
Other companies like Coca Cola, McDonalds and Apple have
snagged brand related consumer videos from YouTube and other
popular video-sharing sites and turned them into commercial
Important fact!!
Marketers cant create customer value and build customer
relationships by themselves. They need to work closely with other
company departments and with partners outside the firm
Partners inside the company
Now a days various departments in the company work together
rather than letting each department go its own way. Rather than
assigning only sales and marketing people to customers, they are
forming cross-functional customer teams.
E.g: P & G assigns customer development teams to each of its major
retailer accounts. These teams consisting of people from various
departments help the retailer be more successful
Marketing partners outside the company
 Most companies today are networked companies relying heavily on
partnerships with other firms.
 Marketing channels consist of distributors, ,retailers and others who
connect the company to its buyers. The supply chain describes a
longer channel, stretching from raw materials to components to final
products that are carried to final buyers. For example: the supply
chain for PC consist of suppliers of computer chips & other
components, the computer manufacturer and the distributors,
retailers & others who sell the computers.
 Companies now concentrates more on supply chain . they don’t
treat suppliers as vendors & distributors as customers, they treat both
as partners in delivering customer value.

 In the first four steps of the marketing process, company creates

value for target customers and builds strong relationships with them.
If it does that well, it can capture value from customers in return in
the form of loyal customers who buy and continue to buy the
company’s brands.
 Creating Customer Loyalty and Retention

 Customers remain loyal and talk favorably to others about the

company and its products, when they are delighted. The aim of the
customer relationship management is not only to satisfy customer but
to also keep them delighted.

 E.g.: Some departmental stores ensures customer retention by

providing privileges like reward points, special offers, and sales
previews to its members.
Customer lifetime value
Companies are realizing that losing a customer means losing more than
a single sale. It means losing the value of the entire stream of purchases
that a customer would make over a lifetime of patronage.

 Growing Share of Customer

Beyond simply retaining good customers to capture customer lifetime
value, good customer relationship management can help marketers to
increase their share of customer – the share they get of the customer’s
purchasing in their product categories.

 To increase share of customers, firm can offer greater variety to

current customers. Or they can create programs to cross sell and up sell
in order to market more products and services to existing customers.
Example: Amazon is highly skilled at leveraging relationship with its
customers to increase its share of each customer’s purchases.
Originally an online book sellers, Amazon now offers customers music,
videos, gifts, toys, consumer electronics, home improvement items,
lawn and garden products, groceries etc.
 Based on each customers purchase history, the company recommends
related products that might be of interest. This recommendation system
may influence up to 30% of all sales. In these ways,
captures a greater share of each customer’s spending budget.

 Building Customer Equity

 Companies not only want to create profitable customers, but to own
them for life, earn a greater share of their purchases, and capture their
customer lifetime value.
“The total combined customer lifetime values of all of the
company’s customers”
 Loyalty increases, Customer equity also increases

 Building the right relationship with the right customers

 Customers should be viewed as assets that need to be managed &
 Some loyal customers can be unprofitable & some disloyal customers
can be profitable
Which customers should the company acquire and retain?
 The company can classify customers according to their profitability
and manage its relationships with them accordingly.

Fig 1.5 classifies customers into one of the 4 relationship groups,

according to their profitability and projected loyalty.

 Each group requires a different relationship management strategy.

Strangers: Low profitability & loyalty. Little fit between company’s
offering and customer’s needs; lowest profit potential.
 The relationship management strategy for these customers is “Don’t
invest anything in them”
Butterflies: Potentially profitable but not loyal. Good fit between
company’s offering and customer’s needs; enjoy them for a while only.
 Only invest in them when they are around
True Friends: Both profitable and loyal & has a strong fit
 Companies want to make continuous investments.
 Loyal but not profitable and has a limited fit
Example: smaller bank customers who bank regularly but do not
generate enough returns to cover the costs of maintaining their
Dramatic changes are taking place in the marketplace. The major trends
and forces that are changing the marketing landscape & challenging
marketing strategy are as follows:
1. The Digital Age
 Growth in technology has had a major impact on the ways
companies bring value to its customers.
 The digital age has provided marketers with exciting new ways to
learn about and track customers and to create products and services
tailored to individual customer needs, example: through computers
including video conferencing
 Digital technology has also brought a new wave of communication,
advertising, relationship building tools – ranging from online
advertising, video sharing tools, cell phones, online social networks
 Now marketers can no longer control the customer conversation over
their brands. Today’s typical internet user spends 47 % of their time
online looking for online content – watching video, reading the news,
or getting the lowdown on friends & celebrities on MySpace or Face
book. They spend another 33 % of their time communicating with each
other, 15% shopping, 5% using the other search engines.
 Online marketing is a fast growing form of marketing. Now a days
almost all companies use web in a significant way like made it
convenient for users to shop online, Business to business online
commerce is also booming. It seems that almost every business has set
up shop on the web.
2. Rapid Globalization
 Marketers are now connected globally with their customers and
marketing partners
 Managers around the world are recognizing the fact that marketers
are becoming increasingly international in nature. To achieve
sustainable growth in global markets, managers must learn the
principles of global marketing. They need to develop the skills,
aptitudes, and knowledge necessary to compete in the global
 Today companies are not only trying to sell more of their locally
produced goods in International markets, they are also now buying
more supplies and components abroad.
Example: Isaac Mizrahi, one the America’s top fashion designer, may
choose cloth woven, designs printed, order in factory in a different
country & redistribute items globally
3. Ethics and social responsibility
 Actions of company on ethics and social responsibility can affect
customer relationships.
 There is a unwritten contract between the customers and the brands
they buy. Firstly, customers expect companies to consistently deliver
what they advertise. Second, they expect the companies they do
business with to treat them with respect and to be honorable and
forthright. Everything a company does affects the brand in the eyes of
the customer.
 Social responsibility – Honda Motor Co. proudly claims that it is
committed to producing automobiles that are environment friendly.
 Ethics – Tylenol, brand of J& J
4.The growth of Not –for- Profit Marketing
 Marketing has also become a major part of the strategies of non for
profit organization including hospitals, colleges, museums, zoos and
even religious institutions.
 Marketing helps these firms to attract membership and support

 Example: Shaukat Khanum Memorial Cancer Hospital and Research

Centre aggressively markets its mission of providing medical care to
indigent cancer patients
 Government agencies have also shown an increased interest in
marketing, like the U.S military has a marketing plan to attract recruits
to its different services.