Kotler Chapter 01

Marketing: Creating Customer Value and Satisfaction, Profitably 0

Chapter Objectives (1)
Define marketing, employing such key elements as value, customer relationships, needs, wants and demands.
Discuss marketing management and elaborate on the basic ideas of demand management and building profitable customer relationships.
List the marketing management philosophies and be able to distinguish between them.
Analyse the key marketing challenges of this century and reflect on the ways these might be overcome.
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What Is Marketing?
An activity, and set of processes for creating, communicating, delivering and exchanging offerings that have value for customers; partners; and society at large.
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Cont’d
An on-going process of planning and executing the development,
the promotion ,
the pricing , and
the distribution
of products to create exchanges that satisfy the requirements of both the customer and the business firm.

The Marketing Process

Selling and Promotion are:
are synonymous with the term marketing
are only the tip of the marketing iceberg
are the most important marketing functions
are the least important marketing functions
are not part of marketing

Understanding the Marketplace and Consumer Needs
Marketers need to understand customer needs, wants and demands and the marketplace within which they operate.
This requires the firm to undertake research in its chosen target market(s).

Needs, Wants and Demands
Human needs are the most basic concept underlying marketing.
Humans have many complex needs including physical; social; and individual needs.
Basic needs are part of human makeup and are stimulated by marketers, not created by them.
When a need is not satisfied, a person will try to reduce the significance of that need, or look for something to satisfy it.
Advanced societies will try to develop products that will satisfy the needs of their community.
However, those in less-developed societies might have to reduce their needs and satisfy them with whatever is available.
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Wants are the specific items that will satisfy the particular human needs, and are shaped by culture and individual personality.
A hungry person in Australia or Singapore might want something different for lunch to what a hungry person in Japan would want.
As a society evolves and develops, the wants of its members expand.
Marketers try to provide more products that can satisfy these increasing consumer wants.
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Demands are those specific wants that are backed up by the consumer’s ability to buy.
Customers view products as bundles of benefits and choose those that give them the best value for their money.
Successful firms go to great lengths to learn about and understand consumers’ needs; wants; and demands.
These firms conduct consumer research; monitor consumer behaviour, complaints and inquiries; and analyse warranty and service performance data.
Understanding these needs; wants; and demands in detail provides important input for designing marketing strategies.
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Want supported by buying power is best described as a(n):
need
desire
demand
exchange
manifestation of greed

Market Offerings: Goods, Services and Experiences
A market offering is a product that is some combination of goods, services and experiences that can be offered to a market to satisfy a need or want.
A product includes physical objects; services; people; places; ideas; and organisations. Anything that satisfies a need/ want can be called a product.
Marketers often use the expression goods and services to distinguish between tangible and intangible products. However, these should be viewed as a continuum, not as opposing elements.

Perceived Value and Satisfaction
Customer perceived value is the difference between the benefits the customer gains in owning and using a product, and the costs of obtaining that product.
Customer Satisfaction is the extent to which a product’s perceived performance matches, or exceeds, the buyer’s expectations.
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Exchange, Transactions and Relationships
Exchange is the act of obtaining a desired object from someone by offering something in return.
Exchange means that people do not need to depend on handouts, or need to have the skills that are required to produce every necessity for themselves.
Exchange is the core concept of marketing. For an exchange, several conditions must be satisfied:
At least two parties must participate, and each must offer something that the other values.
Each party must want to deal with the other, and be free to accept or reject an offer.
Each party must be able to communicate and deliver the offer.
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Cont’d
A transaction is marketing’s unit of measurement, and consists of a trade of value between two parties.
In transactions it must be possible to clearly define what each party is giving and gaining.
Relationship marketing is the process of creating, maintaining and enhancing strong, value-laden relationships with customers and other stakeholders.
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A Market
Is defined as the set of all actual and potential buyers of a product.
Each of these buyers is identified as having a sufficiently similar need, which can be satisfied by the same specific product
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A Simple Marketing System 0

Marketing
Marketing means managing markets to bring about exchanges for the purpose of satisfying human needs and wants.
Marketing is carried out by both sellers and buyers, and by company purchasing agents.

Elements of a Modern Marketing System

Designing a Customer-Driven Marketing Strategy
Marketing management is:
The analysis, planning, implementation and control of programs designed to create, communicate and deliver value to customers and facilitate managing customer relationships in ways that enable the organisation to meet its objectives and those of its stakeholders.
A winning marketing strategy asks ‘what customers will we serve?’ and ‘Who is our target market?’

Selecting Customers to Serve
Marketers cannot serve all customers in every way with a single market offering.
It is necessary to select customers that can be served well and profitably.
De-marketing is marketing in which the task is to temporarily or permanently reduce demand to a level that is more manageable.
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Selecting Customers to Serve
Managing demand means managing customers who come from two groups: new and repeat customers.
Keeping existing customers is important as the cost of retaining them is much less than attracting new ones.
Marketers retain customers by ensuring that branded goods, services and experiences offer intrinsic value and that there is a sense of enjoyment/ excitement associated with the marketing offering and communication used.
Context is important – excitement not always appropriate.
The key to offering excitement is involvement/ interactivity.

Emotional Engagement 0

Choosing a Value Proposition
A firm must decide how it will serve targeted customers, and how it will differentiate and position itself in the marketplace.
A value proposition is the set of benefits or values the firm promises to deliver to consumers to satisfy their needs.

The Marketing MIX
The basic mix is defined as the ‘4 Ps’
Product; Price; Promotion; and Place
Is the only means a marketer has of handling changes in his environment
Firms will modify their Mix in order to deal with the situation in the market.

Marketing Management Orientations
The Production Concept
The Product Concept
The Selling Concept
The Marketing Concept

Production
Consumers prefer products that are widely available, and relatively inexpensive to purchase
The firm’s focus would be on improving production and distribution efficiency to reduce product costs and therefore be in a position to sell more cheaply

Product
Consumers prefer those products that offer the most quality; the best performance; or Innovative features.
Firm’s focus would, primarily, be on regular product enhancement.

Selling/ Sales
Consumers will buy certain products only if they are aggressively promoted and sold.
Firm’s focus would be on advertising and sales activities, especially for those products that consumers do not actively look for.

Marketing
Attempt to identify the needs/ wants of the target market, and then offer a solution that delivers more value than the competitors’ products.
Firm’s focus would be on delivering customer satisfaction, at a profit.

Selling and Marketing Concepts

Societal Marketing
Organisations should determine the needs, wants and interests of target markets and deliver the desired satisfaction more effectively and efficiently than competitors in a way that maintains or improves the customers’ and society’s well-being.
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Cont’d
Overall, should aim to satisfy:
Company profits
Consumer needs/ wants
Community well-being
Preserve or enhance the long-term best interests of the consumer and society
Less toxic
More durable
Reusable; or have recyclable materials

Considerations Underlying the Societal Marketing Concept

Integrated Marketing Program
The company’s marketing strategy outlines which customers the company will serve and how it will create value.
The integrated marketing program is developed to actually deliver the value to target customers.
The program builds relationships by transforming the strategy into action
It is, in effect, the firm’s Marketing Mix.

The Extended Marketing Mix

Extended ‘Services’ Mix
The ‘7 Ps’ - basic Mix, plus:
People – high involvement in the sale
Processes – that add to/ detract from
Physical elements – help in assessment

Building Customer Relationships
The first three steps in the marketing process:
Understanding the marketplace and customer needs
Designing a customer-driven strategy
Marketing programs lead to the most important step: building profitable customer relationships.

Customer Relationship Management (CRM)
CRM is the overall process of building and maintaining profitable customer relationships by delivering superior customer value and satisfaction.
CRM deals with all aspects of acquiring; keeping; and growing customers.

Relationship Building Blocks: Customer Value and Satisfaction
The key to building long lasting relations is to create superior customer value and satisfaction.
Customer Perceived Value is the evaluation of the difference between the benefits and all the costs of a market offering relative to those of competing offers.
Customer Satisfaction depends on the product’s perceived performance matching a buyer’s expectations. If the product’s performance falls short of expectations, the buyer is dissatisfied. If the performance matches or exceeds expectations, the buyer is satisfied or delighted.

The Changing Nature of Customer Relationships
Companies are building more direct and lasting relationships with more carefully selected customers.
CRM is used to retain current customers and build long term, valuable relationships with them.
Companies now use customer profitability analysis to identify low-value customers and relate to winning customers (selective CRM).
Companies aim to connect more deeply and, often, more directly with customers. Direct marketing is on the increase.

Capturing Value from Customers
Creating Customer Loyalty and Retention
Good CRM creates customer delight. Delighted customers remain loyal and talk favourably about the company.
Growing Share of Customer
Good CRM can help marketers to increase their share of customer.
Building Customer Equity
This is the combined discounted customer lifetime values of all the company’s current and potential customers.

Building the Right Relationship with the Right Customers

The New Marketing Landscape
Marketing operates within a dynamic global environment. Rapid changes can quickly make a winning strategy out of date.
Today’s companies deal with changing customer values and orientations; market maturity in many industries; movement of manufacturing to least cost countries; environmental degradation; increased global competition; and many other economic, political and social issues.

Cont’d
However, problems can also become marketing opportunities.
New trends include:
the growth of not-for-profit marketing
increasing level of globalisation
rapid changes in technology
dramatic change in the world economy
the call for more socially responsible actions.

Cont’d
Not-for-profit marketing:
Including philanthropic organisations; universities; hospitals; museums, orchestras; and churches.
Globalisation:
Most marketing organisations are affected in some way by global competition.
Customer Information and Digital Marketing:
The IT explosion is accelerating the rate of change, and the growth of global competitors.

Cont’d
The world economy:
Many countries have grown poorer; around the world, people’s needs are greater, but many lack the means to pay for necessary goods.
Ethical behaviour and social responsibility:
There is an increased call for companies to take responsibility for the social and environmental impact of their actions.

Each of the following conditions must be satisfied for an exchange to take place except:
the existence of a monetary system
two parties each possessing something of value to the other
the ability to accept or reject the offer
ability to communicate and deliver
each party wanting to deal with the other

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Kotler Chapter 01

by Alwyn Lau

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