Chapter 1Marketing: Creating and Capturing Customer Value
What is Marketing? ‘Meeting customer needs profitably’ Old sense of marketing - telling and selling. New sense of marketing - satisfying customer needs. The process by which companies create value for customers and build strong customer relationships in order to capture value from customers in return.
The Marketing Process DESIGN INTEGRATED UNDERSTAND CUSTOMER MARKETING MKT PLACE, DRIVEN PROGRAM THATCUSTOMER NEEDS MARKETING DELIVERS AND WANTS STRATEGY SUPERIOR VALUE CAPTURE VALUE BUILD FROM PROFITABLE CUSTOMERS TO RELATIONSHIP CREATE PROFITS AND CREATE AND CUSTOMER CUSTOMER EQUITY DELIGHT
Customer Needs, Wants & Demands • Basic human requirements Needs • Physical—food, clothing, warmth, safety • Social—belonging and affection • Individual—knowledge and self-expression • Form that needs take as they are Wants shaped by culture and individual personalityDemands • Wants backed by buying power
Realization DirectionDeficiency Need Want Backed by buying power Demand• Examples • I need food but want fish and chips • I need a place to live but want a flat • I need a vacation but want to go to Naran • I need education but want to pursue BBA • I need clothing but want designer clothes.
Market OfferingsProducts, Services & Experiences Market offerings - combination of products, services, information, or experiences offered to a market to satisfy a need or want.
Market offerings include: Products – cars, computers, watches, cosmetics etc. Services – airline, hotels, car rental, barbers, bankers, lawyers, repair people etc. Information – education, product manuals, X-ray etc. Experiences – amusement parks, cinemas, football & cricket leagues, travel tales etc. Persons – artists, musicians, high profile professionals, politicians etc. Places – cities, states, regions shopping malls etc. Organizations – universities, multinational companies etc. Ideas – AIDS, dengue, polio, anti-smoking campaigns etc.
Marketing Myopia Failure to recognize the ‘scope of the business’ Product-oriented rather than customer-oriented management endangers future growth. e.g. railway, movies etc. Customers do not buy products, they buy solution or benefit. The needs would stay the same but the wants would change
Exchange Exchange is the act of obtaining a desired object from someone by offering something in return. The essence of marketing is a transaction or exchange. Marketing occurs when people decide to satisfy needs and wants through exchange relationships.
Market Markets are the set of actual and potential buyers of a product. These buyers share a particular need or want that can be satisfied through exchange relationships.
Designing a customer-driven marketing strategy Marketing management is the art and science of choosing target markets and building profitable relationships with them. Find, attract, keep & grow target customers by creating, delivering & communicating superior customer value. The marketing manager must answer: What customers will we serve? (Target market) How can we best serve these customers? (Value proposition)
Selecting customers to serve ‘You can’t keep everybody happy’ ‘By trying to serve all the customers, they may not serve any customers well’ Market segmentation refers to dividing the markets into segments of customers. Target marketing refers to which segments to go after. Market segmentation must take place before a target market is determined.
Market segmentation is the process of dividing a market into separate subsets that behave in the same way. Segmenting is done by: Demographics - age, sex, income, race etc. Geographic - international, city, state, national, climate, etc. Psychographics - personality, lifestyle, political party, etc. Behavioral characteristics - consumption status, brand loyalties, shopping habits, etc.
Demarketing In case of excess demand, companies may practice demarketing to: Reduce the number of their customers Shift their demand temporarily or permanently Example – WAPDA, Sui Gas
Choosing a value proposition ‘Differentiating & Positioning yourself in the market’ The value proposition is the set of benefits or values a company promises to deliver to customers to satisfy their needs. It answers customer’s question – ‘why I should buy your brand rather than a competitor’s?’ Example: Nokia is connecting people, where as Apple iphone is touching is believing.
Production concept Production concept is the idea that consumers will favor products that are available or highly affordable. Management should focus on improving production and distribution efficiency. This concept is one of the oldest orientation that guides sellers. Although useful in some situations such as highly competitive, price sensitive markets but can lead to marketing myopia.
Product concept 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: Design, pack and price the product attractively Place it in convenient distribution channels Bring it to the attention of people Convince buyers that it is a better product
Selling concept Selling concept is the idea that consumers will not buy enough of the firm’s products unless it undertakes a large scale selling and promotion effort. Focus is on creating sales transactions rather than on building long term profitable customer relationship. The aim is to sell what the company makes rather than making what the market wants.
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. Customer focus and value are the paths to sales and profits. The job is not to find the right customers for your product but to find the right products for your customers.
Societal marketing Societal marketing concept is the idea that a company should make good marketing decisions by considering consumers’ wants, the company’s requirements, consumers’ long-term interests, and society’s long-run interests. Examples: Bottled water companies contribute to global warming. Fast food affects society’s health in the long run.
Preparing an Integrated Marketing Plan and Program Marketing mix is the set of tools classified as 4Ps: Product – a need satisfying market offering Price – the charge for the offering Place – the availability of the offering Promotion – communicating with the customers Integrated marketing program is a comprehensive plan that communicates and delivers the intended value to chosen customers.
Customer Relationship Management (CRM) The overall process of building and maintaining profitable customer relationships by delivering superior customer value and satisfaction. It deals with the aspects of acquiring, keeping and growing customers.
Relationship Building Blocks: Customer Value and Satisfaction Customer- Customer perceived value satisfaction• The customer’s • The extent to which evaluation of a product’s difference between perceived all the benefits and performance all the costs of a matches a buyer’s marketing offer expectations relative to those of competing offers.
Customer Value & Satisfaction Customers form expectations about the value and satisfaction that various marketing offerings will deliver and buy accordingly. Satisfied customers buy again and tell others. Dissatisfied customers often switch to competitors and pass on their bad experience. Marketers must set the right level of expectations to ensure customer satisfaction. Customer satisfaction leads to customer relationships
Customer Relationship Levels and Tools Full Partnerships - Basic Relationships - company with few company with many customers and high low margin customers margins Tools: brand building Tools: one to one advertising, sales communication, promotion, website etc. customized communication
The changing nature of Customer Relationships Relating with more carefully selected customers Today marketers engage in selective relationship management by targeting fewer, more profitable customers. Relating more deeply & interactively Marketers are using more interactive two way relationships through emails, blogs, websites, video sharing to online communities and social networks such as face book and you tube. This has led to rise in Consumer -Generated Marketing.
Partner relationship management Partners inside the company is every function area interacting with customers Partners outside the company is how marketers connect with their suppliers, channel partners, and competitors by developing partnerships
Creating Customer Loyalty & Retention The final step involves capturing value in return in form of current and future sales, market share, profits. It creates highly satisfied customers who stay loyal, who buy and continue to buy the company brands. This creates greater long run return for the firms. Good customer relationship management creates customer delight. Delighted customers remain loyal and talk favorably to others about the company and its products.
Customer equity Customer equity is the total combined customer lifetime values of all of the company’s customers. The only value your company will ever create is the value that comes from customers – the ones you have now and the ones you have in the future. The more loyal the firms profitable customers, the higher the firms customer equity.
The changing marketing landscape Rapid Digital age globalization Ethics and Not-for-profit social marketingresponsibility