Marketing: Creating & Capturing Customer Value

1. Chapter 1
Marketing
Creating and Capturing
Customer Value

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Hall
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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 that guide strategy.
4. Discuss customer relationship management
and identify strategies for creating value for
and capturing value from customers.
5. Describe the major trends and forces that are
changing the marketing landscape.
Rest Stop: Previewing the Concepts

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Creating Customer Value
• Goal: Provide the very best
customer service & customer
experience.
• Customer-centric approach:
Free delivery, free returns,
365 day return policy &
service upgrades.
• Results: 75% of sales come
from current customers,
tremendous sales growth
despite poor economy, 10
million customers served
annually.
Zappos Creates Customer Value & Relationships
First Stop
Building Relationships
• Service Culture: Built around
10 core principles; every new
hire takes 4 weeks of customer
loyalty training.
• Commitment: During training,
employees are offered $2000 to
quit; only 1% do so.
• Lifelong relationships are the
goal: Employees comparison
shop other Web sites; social
networking is used for direct
contact with customers;
customer feedback and criticism
is strongly encouraged and
valued.

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What Is Marketing?
Simple definition:
Marketing is managing profitable customer
relationships.
Therefore: Marketing is satisfying the wants
and needs of customers, at a profit.
Goals:
1. Attract new customers by promising
superior value.
2. Keep and grow current customer-base by
delivering satisfaction.

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Marketing Defined
• Marketing is the process by which
companies create value for customers and
build strong customer relationships in order
to capture value from customers in return.
OLD view of
marketing:
Making a sale -
“telling and selling”
NEW view of
marketing:
Satisfying
customer needs

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The Marketing Process
• A simple model of the marketing process:
 Understand the marketplace and customer
needs and wants.
 Design a customer-driven marketing strategy.
 Construct an integrated marketing program
that delivers superior value.
 Build profitable relationships and create
customer delight.
 Capture value from customers to create
profits and customer equity.

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Core Concepts
• Marketers must understand five core
customer and marketplace concepts:
Needs, wants, and demands
Market offerings
Value and satisfaction
Exchanges and relationships
Markets

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Needs, Wants, and Demands
• Need:
State of felt deprivation including physical,
social, and individual needs.
 Physical, social, and individual needs
• Wants:
Form that a human need takes, as shaped
by culture and individual personality.
• Wants + Buying Power = Demand

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Marketing Offerings
• Needs and wants are fulfilled through
a Marketing Offer:
Some combination of products,
services, information, or experiences
offered to a market to satisfy a need or
want.

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Market Offerings
• Products:
 Persons, places, organizations, information,
and ideas.
• Services:
 Activity or benefit offered for sale that is
essentially intangible and does not result in
ownership.
• Brand experiences:
 Should immerse the consumer in the brand
experience and may be intensely personal.

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Marketing Myopia
• Marketing myopia:
Occurs when sellers pay more attention
to the specific products they offer than
to the benefits and experiences
produced by the products.
They focus on the “wants” and lose sight
of the “needs.”

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Customer Value and Satisfaction
• Care must be taken when setting
expectations for market offerings:
If performance is lower than
expectations, satisfaction is low.
If performance is higher than
expectations, satisfaction is high.

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Exchanges and Relationships
• Exchange:
Act of obtaining a desired object from
someone by offering something in
return.
• Relationships:
Marketing actions build and maintain
relationships with target audiences
involving an idea, product, service, or
other object. Value builds relationships.

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What Is a Market?
• A market:
Is the set of actual and potential buyers
of a product.
• These people share a need or want
that can be satisfied through
exchange relationships.

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Modern Marketing Systems
• Main elements in a modern marketing
system include:
 Suppliers
 Company (marketer)
 Competitors
 Marketing intermediaries
 Consumers
• Major environmental forces affect each
element.

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Marketing Management
• The art and science of choosing
target markets and building profitable
relationships with them.
Aim is to find, attract, keep, and grow
customers by creating, delivering, and
communicating superior value.

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Marketing Management
• Designing a winning marketing
strategy requires answers to the
following questions:
1. What customers will we serve?
— What is our target market?
2. How can we best serve these
customers?
— What is our value proposition?

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Selecting Customers to Serve
• Market segmentation:
Dividing the market into segments of
customers.
• Target marketing:
Selecting one or more segments to
cultivate.

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Choosing a Value Proposition
• The set of benefits or values a
company promises to deliver to
consumers to satisfy their needs.
Value propositions dictate how firms will
differentiate and position their brands in
the marketplace.

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Marketing Management
Orientations
• Organizations design and carry out
their marketing strategies under five
alternate concepts:
Production Concept
Product Concept
Selling Concept
Marketing Concept
Societal Marketing Concept

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The Marketing Concept
• The marketing concept:
A marketing management philosophy
that holds that achieving organizational
goals depends on knowing the needs
and wants of target markets and
delivering the desired satisfaction better
than competitors.

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The Societal
Marketing Concept
• The societal marketing concept:
The idea that a company’s marketing
decisions should consider consumers’
wants, the company’s desires,
consumers’ long-run interests, and
society’s long-run interests.

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The Integrated Marketing Plan
• Transforms the marketing strategy
into action.
• Includes the marketing mix and 4 Ps
of marketing:
Product
Price
Place (Distribution)
Promotion

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Building Customer Relationships
• Customer relationship management:
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.
• Customer value and satisfaction are key.

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Customer Perceived Value
• Customer perceived value:
Customer’s evaluation of the difference
between all of the benefits and all of the
costs of a marketing offer relative to
those of competing offers.
• Perceptions may be subjective
• To some customers “value” might mean
paying more to get more.

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Customer Satisfaction
• Customer satisfaction:
Extent to which the product’s perceived
performance matches a buyer’s
expectations.
• High levels of customer satisfaction often
leads to consumer loyalty.
• Some firms seek to DELIGHT customers by
exceeding expectations.
• Profitability must be considered.

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Customer Relationships
• Firms may choose to build
relationships at different levels.
• Loyalty and retention programs build
relationships and may include:
Frequency marketing programs
Club marketing programs

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Changing Nature of Relationships
• Customer profitability analysis eliminates losing
customers and selects profitable ones with
whom relationships should be developed.
• Firms related more deeply and interactively via
blogs, social network Web sites, e-mail, and
video sharing.
• Embracing customer-managed relationships
requires marketing via attraction rather than
intrusion.
• Consumer-generated marketing has become a
significant marketing force.

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Partner Relationship Marketing
• Marketing partners help create
customer value and assist in building
customer relationships.
• Partners inside the firm:
Cross-functional customer teams
• Partners outside the firm:
Supply chain management

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Capturing Value From Customers
• Value is captured from customers via
current and future sales, market
share, and profit.
Superior customer value leads to highly
satisfied loyal customers who buy more.
Key outcomes of customer value
include customer loyalty and retention,
share of market, share of customer, and
customer equity.

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Customer Equity
• The total combined customer lifetime
values of all the company’s current
and potential customers.
• Manage equity by:
Classifying customers by projected
loyalty and potential profitability.
Manage each group accordingly.

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Capturing Value From Customers
• Customer lifetime value
The value of the entire stream of
purchases that the customer would
make over a lifetime of patronage.
• Share of customer
The portion of the customer’s
purchasing that a company gets in their
product categories.

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Changing Marketing Landscape
• The uncertain economic environment
• The digital age
• Rapid globalization
• Sustainable marketing – call for more
social responsibility
• Growth of not-for-profit marketing

34. Copyright 2011, Pearson Education Inc. Publishing as Prentice-
Hall
1 - 34
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 that guide strategy.
4. Discuss customer relationship management
and identify strategies for creating value for
and capturing value from customers.
5. Describe the major trends and forces that are
changing the marketing landscape.
Rest Stop: Reviewing the Concepts

35. Copyright 2011, Pearson Education Inc. Publishing as Prentice-
Hall
1 - 35
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Copyright © 2011 Pearson Education, Inc.
Publishing as Prentice Hall