Kotler ch01 lecture
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The document outlines key concepts in marketing for hospitality and tourism, including: 1) It defines marketing as the process of creating value for customers and capturing value in return through strong customer relationships. 2) It discusses the marketing mix and how companies fulfill customer needs and wants through products and services. 3) It explains the importance of customer orientation, satisfaction, and lifetime value in marketing.
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- 1. Marketing for Hospitality and TourismMarketing for Hospitality and Tourism CHAPTER Seventh Edition, Global Edition ICD-10-CM/PCS Coding: A Map to Success Lorraine M. Papazian-Boyce Marketing for Hospitality and Tourism, 7e, GE, Kotler, Bowen, Makens, Baloglu Copyright © 2017 Pearson Education, Ltd. All Rights Reserved Introduction: Marketing for Hospitality and Tourism 1
- 2. ICD-10-CM/PCS Coding: A Map to Success Lorraine M. Papazian-Boyce Marketing for Hospitality and Tourism, 7e, GE, Kotler, Bowen, Makens, Baloglu Copyright © 2017 Pearson Education, Ltd. All Rights Reserved Learning Objectives 1. Understand the relationships between the world's hospitality and travel industry. 2. Define marketing and outline the steps in the marketing process. 3. Explain the relationships between customer value and satisfaction.
- 3. ICD-10-CM/PCS Coding: A Map to Success Lorraine M. Papazian-Boyce Marketing for Hospitality and Tourism, 7e, GE, Kotler, Bowen, Makens, Baloglu Copyright © 2017 Pearson Education, Ltd. All Rights Reserved Learning Objectives (cont.) 4. Understand why the marketing concept calls for a customer orientation. 5. Understand the concept of the lifetime value of a customer and be able to relate it to customer loyalty and retention.
- 4. ICD-10-CM/PCS Coding: A Map to Success Lorraine M. Papazian-Boyce Marketing for Hospitality and Tourism, 7e, GE, Kotler, Bowen, Makens, Baloglu Copyright © 2017 Pearson Education, Ltd. All Rights Reserved Chipotle Mexican Grill Key Components of Chipotle's Vision Key Components of Chipotle's Vision
- 5. ICD-10-CM/PCS Coding: A Map to Success Lorraine M. Papazian-Boyce Marketing for Hospitality and Tourism, 7e, GE, Kotler, Bowen, Makens, Baloglu Copyright © 2017 Pearson Education, Ltd. All Rights Reserved Purpose of a Business Customer Orientation Customer Orientation
- 6. ICD-10-CM/PCS Coding: A Map to Success Lorraine M. Papazian-Boyce Marketing for Hospitality and Tourism, 7e, GE, Kotler, Bowen, Makens, Baloglu Copyright © 2017 Pearson Education, Ltd. All Rights Reserved What is Marketing? • Marketing is the process by which companies create value for customers and society, resulting in strong customer relationships which capture value from the customers in return.
- 7. ICD-10-CM/PCS Coding: A Map to Success Lorraine M. Papazian-Boyce Marketing for Hospitality and Tourism, 7e, GE, Kotler, Bowen, Makens, Baloglu Copyright © 2017 Pearson Education, Ltd. All Rights Reserved Marketing Mix
- 8. ICD-10-CM/PCS Coding: A Map to Success Lorraine M. Papazian-Boyce Marketing for Hospitality and Tourism, 7e, GE, Kotler, Bowen, Makens, Baloglu Copyright © 2017 Pearson Education, Ltd. All Rights Reserved Tourism Marketing Tourism Marketing Tourism Marketing
- 9. ICD-10-CM/PCS Coding: A Map to Success Lorraine M. Papazian-Boyce Marketing for Hospitality and Tourism, 7e, GE, Kotler, Bowen, Makens, Baloglu Copyright © 2017 Pearson Education, Ltd. All Rights Reserved Figure 1–1 A simple model of the marketing process.
- 10. ICD-10-CM/PCS Coding: A Map to Success Lorraine M. Papazian-Boyce Marketing for Hospitality and Tourism, 7e, GE, Kotler, Bowen, Makens, Baloglu Copyright © 2017 Pearson Education, Ltd. All Rights Reserved MarketsMarketsExchanges & Relationships Exchanges & Relationships Core Customer & Marketplace Concepts Needs, Wants & Demands Needs, Wants & Demands Marketing Offerings Marketing Offerings Value & Satisfaction Value & Satisfaction
- 11. ICD-10-CM/PCS Coding: A Map to Success Lorraine M. Papazian-Boyce Marketing for Hospitality and Tourism, 7e, GE, Kotler, Bowen, Makens, Baloglu Copyright © 2017 Pearson Education, Ltd. All Rights Reserved Needs, Wants & Demands Needs WantsDemands
- 12. ICD-10-CM/PCS Coding: A Map to Success Lorraine M. Papazian-Boyce Marketing for Hospitality and Tourism, 7e, GE, Kotler, Bowen, Makens, Baloglu Copyright © 2017 Pearson Education, Ltd. All Rights Reserved Marketing Offerings • Customer wants and needs are fulfilled through some combination of tangible and intangible products and services.
- 13. ICD-10-CM/PCS Coding: A Map to Success Lorraine M. Papazian-Boyce Marketing for Hospitality and Tourism, 7e, GE, Kotler, Bowen, Makens, Baloglu Copyright © 2017 Pearson Education, Ltd. All Rights Reserved The Gamboa Rainforest Resort offers an experience of a lifetime, allowing guests to explore Panama's rainforest and then relax at a resort enjoying a meal while watching ships traverse the Panama Canal. Courtesy of Bern Hotels & Resorts.
- 14. ICD-10-CM/PCS Coding: A Map to Success Lorraine M. Papazian-Boyce Marketing for Hospitality and Tourism, 7e, GE, Kotler, Bowen, Makens, Baloglu Copyright © 2017 Pearson Education, Ltd. All Rights Reserved Value & Satisfaction Customer Satisfaction Customer Satisfaction
- 15. ICD-10-CM/PCS Coding: A Map to Success Lorraine M. Papazian-Boyce Marketing for Hospitality and Tourism, 7e, GE, Kotler, Bowen, Makens, Baloglu Copyright © 2017 Pearson Education, Ltd. All Rights Reserved Exchanges & Relationships and Markets Exchange Relationshipsvs. MARKET
- 16. ICD-10-CM/PCS Coding: A Map to Success Lorraine M. Papazian-Boyce Marketing for Hospitality and Tourism, 7e, GE, Kotler, Bowen, Makens, Baloglu Copyright © 2017 Pearson Education, Ltd. All Rights Reserved Marketing Management Orientations Management Orientations Management Orientations
- 17. ICD-10-CM/PCS Coding: A Map to Success Lorraine M. Papazian-Boyce Marketing for Hospitality and Tourism, 7e, GE, Kotler, Bowen, Makens, Baloglu Copyright © 2017 Pearson Education, Ltd. All Rights Reserved Societal Marketing Company (Profits) Consumers (Want Satisfaction) Society (Human welfare) Societal Marketing Concept
- 18. ICD-10-CM/PCS Coding: A Map to Success Lorraine M. Papazian-Boyce Marketing for Hospitality and Tourism, 7e, GE, Kotler, Bowen, Makens, Baloglu Copyright © 2017 Pearson Education, Ltd. All Rights Reserved Customer Relationship Management
- 19. ICD-10-CM/PCS Coding: A Map to Success Lorraine M. Papazian-Boyce Marketing for Hospitality and Tourism, 7e, GE, Kotler, Bowen, Makens, Baloglu Copyright © 2017 Pearson Education, Ltd. All Rights Reserved Engaging Customers
- 20. ICD-10-CM/PCS Coding: A Map to Success Lorraine M. Papazian-Boyce Marketing for Hospitality and Tourism, 7e, GE, Kotler, Bowen, Makens, Baloglu Copyright © 2017 Pearson Education, Ltd. All Rights Reserved Lifetime Value of the Customer • Losing a customer means losing more than a single sale. – It means losing the entire stream of purchases that the customer would make over a lifetime of patronage.
- 21. ICD-10-CM/PCS Coding: A Map to Success Lorraine M. Papazian-Boyce Marketing for Hospitality and Tourism, 7e, GE, Kotler, Bowen, Makens, Baloglu Copyright © 2017 Pearson Education, Ltd. All Rights Reserved Lifetime Value of the Customer (cont.) • A company can lose money on a specific transaction but still benefit greatly from a long-term relationship. – This is one of the reasons successful companies empower employees to resolve customer complaints.
- 22. ICD-10-CM/PCS Coding: A Map to Success Lorraine M. Papazian-Boyce Marketing for Hospitality and Tourism, 7e, GE, Kotler, Bowen, Makens, Baloglu Copyright © 2017 Pearson Education, Ltd. All Rights Reserved Figure 1–5 Customer relationship groups. Source: Kotler, Philip; Armstrong, Gary, Principles of Marketing, 16th Ed., ©2016, pp. 12, 24, 50. Reprinted and Electronically reproduced by permission of Pearson Education, Inc., New York, NY.
- 23. ICD-10-CM/PCS Coding: A Map to Success Lorraine M. Papazian-Boyce Marketing for Hospitality and Tourism, 7e, GE, Kotler, Bowen, Makens, Baloglu Copyright © 2017 Pearson Education, Ltd. All Rights Reserved The Changing Marketing Landscape
- 24. ICD-10-CM/PCS Coding: A Map to Success Lorraine M. Papazian-Boyce Marketing for Hospitality and Tourism, 7e, GE, Kotler, Bowen, Makens, Baloglu Copyright © 2017 Pearson Education, Ltd. All Rights Reserved Key Terms • Consumer-Engagement Marketing fosters direct and continuous customer involvement in shaping brand conversations, experiences, and community.
- 25. ICD-10-CM/PCS Coding: A Map to Success Lorraine M. Papazian-Boyce Marketing for Hospitality and Tourism, 7e, GE, Kotler, Bowen, Makens, Baloglu Copyright © 2017 Pearson Education, Ltd. All Rights Reserved Key Terms (cont.) • Consumer-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 Equity – The discounted lifetime values of all the company's current and potential customer
- 26. ICD-10-CM/PCS Coding: A Map to Success Lorraine M. Papazian-Boyce Marketing for Hospitality and Tourism, 7e, GE, Kotler, Bowen, Makens, Baloglu Copyright © 2017 Pearson Education, Ltd. All Rights Reserved Key Terms (cont.) • Customer Satisfaction – The extent to which a product's perceived performance matches a buyer's expectations • Customer Expectations – Based on past buying experiences, the opinions of friends, and market information
- 27. ICD-10-CM/PCS Coding: A Map to Success Lorraine M. Papazian-Boyce Marketing for Hospitality and Tourism, 7e, GE, Kotler, Bowen, Makens, Baloglu Copyright © 2017 Pearson Education, Ltd. All Rights Reserved Key Terms (cont.) • Customer Relationship Management (CRM) involves managing detailed information about individual customers and carefully managing customer "touch points" in order to maximize customer loyalty.
- 28. ICD-10-CM/PCS Coding: A Map to Success Lorraine M. Papazian-Boyce Marketing for Hospitality and Tourism, 7e, GE, Kotler, Bowen, Makens, Baloglu Copyright © 2017 Pearson Education, Ltd. All Rights Reserved Key Terms (cont.) • Customer Touch Point – Any occasion on which a customer encounters the brand and product—from actual experience to personal or mass communications to casual observation
- 29. ICD-10-CM/PCS Coding: A Map to Success Lorraine M. Papazian-Boyce Marketing for Hospitality and Tourism, 7e, GE, Kotler, Bowen, Makens, Baloglu Copyright © 2017 Pearson Education, Ltd. All Rights Reserved Key Terms (cont.) • Customer Value – The difference between the benefits that the customer gains from owning and/or using a product and the costs of obtaining the product • Demands – Human wants that are backed by buying power
- 30. ICD-10-CM/PCS Coding: A Map to Success Lorraine M. Papazian-Boyce Marketing for Hospitality and Tourism, 7e, GE, Kotler, Bowen, Makens, Baloglu Copyright © 2017 Pearson Education, Ltd. All Rights Reserved Key Terms (cont.) • Digital and Social Media Marketing – Using digital marketing tools such as Web sites, social media, mobile apps and ads, online video, e-mail, and blogs that engage consumers anywhere, at anytime, via their digital devices
- 31. ICD-10-CM/PCS Coding: A Map to Success Lorraine M. Papazian-Boyce Marketing for Hospitality and Tourism, 7e, GE, Kotler, Bowen, Makens, Baloglu Copyright © 2017 Pearson Education, Ltd. All Rights Reserved Key Terms (cont.) • Exchange – The act of obtaining a desired object from someone by offering something in return • Hospitality Industry – Made up of those businesses that offer one or more of the following: accommodation, prepared food and beverage service, and/or entertainment
- 32. ICD-10-CM/PCS Coding: A Map to Success Lorraine M. Papazian-Boyce Marketing for Hospitality and Tourism, 7e, GE, Kotler, Bowen, Makens, Baloglu Copyright © 2017 Pearson Education, Ltd. All Rights Reserved Key Terms (cont.) • Human Need – A state of felt deprivation in a person • Human Want – The form that a human need takes when shaped by culture and individual personality
- 33. ICD-10-CM/PCS Coding: A Map to Success Lorraine M. Papazian-Boyce Marketing for Hospitality and Tourism, 7e, GE, Kotler, Bowen, Makens, Baloglu Copyright © 2017 Pearson Education, Ltd. All Rights Reserved Key Terms (cont.) • Lifetime Value (LTV) – The lifetime value of a customer is the stream of profits a customer will create over the life of his or her relationship to a business • Marketing – The art and science of finding, retaining, and growing profitable customers
- 34. ICD-10-CM/PCS Coding: A Map to Success Lorraine M. Papazian-Boyce Marketing for Hospitality and Tourism, 7e, GE, Kotler, Bowen, Makens, Baloglu Copyright © 2017 Pearson Education, Ltd. All Rights Reserved Key Terms (cont.) • Marketing Concept – The marketing management philosophy that holds that achieving organizational goals depends on determining the needs and wants of target markets and delivering desired satisfactions more effectively and efficiently than competitors.
- 35. ICD-10-CM/PCS Coding: A Map to Success Lorraine M. Papazian-Boyce Marketing for Hospitality and Tourism, 7e, GE, Kotler, Bowen, Makens, Baloglu Copyright © 2017 Pearson Education, Ltd. All Rights Reserved Key Terms (cont.) • Marketing Management – The art and science of choosing target markets and building profitable relationships with them • Marketing Manager – A person who is involved in marketing analysis, planning, implementation, and control activities.
- 36. ICD-10-CM/PCS Coding: A Map to Success Lorraine M. Papazian-Boyce Marketing for Hospitality and Tourism, 7e, GE, Kotler, Bowen, Makens, Baloglu Copyright © 2017 Pearson Education, Ltd. All Rights Reserved Key Terms (cont.) • Marketing Mix – Elements include product, price, promotion, and distribution. Sometimes distribution is called place and the marketing situation facing a company.
- 37. ICD-10-CM/PCS Coding: A Map to Success Lorraine M. Papazian-Boyce Marketing for Hospitality and Tourism, 7e, GE, Kotler, Bowen, Makens, Baloglu Copyright © 2017 Pearson Education, Ltd. All Rights Reserved Key Terms (cont.) • Product Concept – Anything that can be offered to a market for attention, acquisition, use, or consumption that might satisfy a want or need. It includes physical objects, services, persons, places, organizations, and ideas.
- 38. ICD-10-CM/PCS Coding: A Map to Success Lorraine M. Papazian-Boyce Marketing for Hospitality and Tourism, 7e, GE, Kotler, Bowen, Makens, Baloglu Copyright © 2017 Pearson Education, Ltd. All Rights Reserved Key Terms (cont.) • Production Concept holds that customers will favor products that are available and highly affordable, and therefore management should focus on production and distribution efficiency. • Purpose of a Business – To create and maintain satisfied, profitable customers
- 39. ICD-10-CM/PCS Coding: A Map to Success Lorraine M. Papazian-Boyce Marketing for Hospitality and Tourism, 7e, GE, Kotler, Bowen, Makens, Baloglu Copyright © 2017 Pearson Education, Ltd. All Rights Reserved Key Terms (cont.) • Relationship Marketing involves creating, maintaining, and enhancing strong relationships with customers and other stakeholders. • Selling Concept – The idea that consumers will not buy enough of an organization's products unless the organization undertakes a large selling and promotion effort
- 40. ICD-10-CM/PCS Coding: A Map to Success Lorraine M. Papazian-Boyce Marketing for Hospitality and Tourism, 7e, GE, Kotler, Bowen, Makens, Baloglu Copyright © 2017 Pearson Education, Ltd. All Rights Reserved Key Terms (cont.) • Share of Consumer – The portion of the customer's purchasing that a company gets in its product categories
- 41. ICD-10-CM/PCS Coding: A Map to Success Lorraine M. Papazian-Boyce Marketing for Hospitality and Tourism, 7e, GE, Kotler, Bowen, Makens, Baloglu Copyright © 2017 Pearson Education, Ltd. All Rights Reserved Key Terms (cont.) • Societal Marketing Concept – The idea that an organization should determine the needs, wants, and interests of target markets and deliver the desired satisfactions more effectively and efficiently than competitors in a way that maintains or improves the consumer's and society's well-being
- 42. ICD-10-CM/PCS Coding: A Map to Success Lorraine M. Papazian-Boyce Marketing for Hospitality and Tourism, 7e, GE, Kotler, Bowen, Makens, Baloglu Copyright © 2017 Pearson Education, Ltd. All Rights Reserved Key Terms (cont.) • Transaction consists of a trade of values between two parties; marketing's unit of measurement. • Value Proposition – The full positioning of a brand—the full mix of benefits upon which it is positioned
Editor's Notes
- Food with Integrity (FWI), The Cornerstone of Chipotle's Vision Fresh Ingredients True to the tradition of French cooking, Steve insists on fresh products—not canned, frozen, or freeze-dried. Organic, Naturally Raised Foods With an emphasis on great-tasting food, quality, and simplicity, they review each ingredient used in Chipotle and explore the possibility of incorporating as many organic or naturally raised foods as possible. Examples: Niman Ranch for pork, Bell & Evans for chicken Restaurant Environment The kitchen and food preparation areas are right in front of the customers and were designed to appeal to the senses. Customers observe freshness, cleanliness, and variety at the same time they smell spices and hear the sizzle of meat on the grill. Chipotle is the only quick-service restaurant that commissions original art for each location. Each piece of music played within a Chipotle restaurant was self-selected by a team from Chipotle management and is designed for self-destruction after a set period of time to ensure freshness in the music as well as the food. Pricing Unlike most quick-service restaurant chains, Chipotle offers no coupons or specials. At Chipotle all food all the time is either full price or free. Loyalty Both internal and external External: crew members "help Chipotle customers build their version of the perfect burrito" Internal: Chipotle has developed an incentive for managers to grow their employees, as well as letting managers keep 10% of any revenue gains over the year's budget. Social Networking Over 1.5 million people have given Chipotle's Facebook page a thumbs up Not everything posted on Chipotle's wall is positive. However, a representative of Chipotle responds to both the positive and negative comments, usually within the hour.
- The purpose of a business is to create and maintain satisfied, profitable customers. Customers are attracted and retained when their needs are met. What about price? When a business satisfies its customers, the customers will pay a fair price for the product, which includes a profit for the firm. It is wise to assess the customer's long-term value and take appropriate actions to ensure a customer's long-term support. A hotel that can increase its repeat customers from 35 to 40 percent should gain at least an additional 25 percent in profits
- Marketing means "hitting the mark." According to Peter Drucker: "The aim of marketing is to make selling superfluous. The aim is to know and understand customers so well that the product or service fits them and sells itself." This does not mean that selling and promotion are unimportant, but are part of a larger set of marketing tools that work together to produce satisfied customers. McDonald's Example: Product: fast-food with quality ingredients Place: most customers will not travel more than 15 minutes to a McDonald's, so they need restaurants that are conveniently located to their target market Price: sells at prices people expect to pay for fast food Promotion: they appeal to different market segments, which allows McDonald's to make effective use of mass media for promotional purposes
- The two main industries that comprise the activities we call tourism are the hospitality and travel industries. The hospitality industry is one of the world's major industries In the United States, it is the second largest employer In more than half of the fifty states, it is the largest industry. Few industries are as interdependent as travel–hospitality. The travel industry will require marketing professionals who understand the big picture and can respond to changing consumer needs through creative strategies based on solid marketing knowledge.
- The Marketing Process In the first four steps, companies work to understand consumers, create customer value, and build strong customer relationships In the final step, companies reap the rewards of creating superior customer value By creating value for customers, companies are able capture value from customers in the form of sales, profits, and long-term customer equity
- As a first step, marketers need to understand customer needs and wants and the marketplace within which they operate. Needs A human need is a state of felt deprivation Included are: The basic physical needs for food, clothing, warmth, and safety Social needs for belonging, affection, fun, and relaxation Esteem needs for prestige, recognition, and fame Individual needs for knowledge and self-expression Wants The form human needs take as they are shaped by culture and individual personality As a society evolves, the wants of its members expand Be careful not to confuse wants with needs For example: a manufacturer of drill bits may think that customers need a drill bit, but what the customers really need is a hole (aka "marketing myopia") Demands People have almost unlimited wants, but limited resources Therefore, wants become demands when backed by buying power
- A market offering includes much more than just physical goods or services. Consumers decide which events to experience, which tourist destinations to visit, which hotels to stay in, and which restaurants to patronize. To the consumer these are all products.
- Customer value is the difference between the benefits that the customer gains from owning and/or using a product and the costs of obtaining the product Costs can be both monetary and nonmonetary One of the biggest nonmonetary costs for hospitality customers is time Managers must know their customers and understand what creates value for them This is an ongoing process as customers and competition change over time Customer expectations are based on past buying experiences, the opinions of friends, and market information If we meet customer expectations, they are satisfied Marketers must be careful to set the right level of expectations Too high = disappointed customers Too low = fail to attract new customers Customer satisfaction depends on a product's perceived performance in delivering value relative to a buyer's expectations Delivering value: If falls short of the customer's expectations, the buyer is dissatisfied If matches expectations, the buyer is satisfied If exceeds expectations, the buyer is delighted Smart companies aim to delight customers by promising only what they can deliver and then delivering more than they promise
- Exchange is the act of obtaining a desired object from someone by offering something in return Beyond simply attracting new customers and creating transactions, the goal is to retain customers and grow their business with the company Marketers want to build strong relationships by consistently delivering superior customer value A market is a set of actual and potential buyers of a product These buyers share a particular need or want that can be satisfied through exchange relationships
- There are five alternative concepts under which organizations design and carry out their marketing strategies: the production, product, selling, marketing, and societal marketing Production Belief that consumers will favor products that are available and highly affordable, and therefore management should focus on production and distribution efficiency Problem: The management may become so focused on production systems that they forget the customer. Product Belief that consumers will favor products that offer the most in quality, performance, and innovative features Problem: Focusing only on the company's products can lead to marketing myopia (refer to slide 1-8) Selling Belief that consumers will not buy enough of the organization's products unless the organization undertakes a large selling and promotion effort Problem: Doesn't establish a long-term relationship with the customer because the focus is on getting rid of what one has, rather than creating a product to meet the needs of the market Marketing Belief that achieving organizational goals depends on determining the needs and wants of target markets and delivering the desired satisfaction more effectively and efficiently than competitors Problem: Niche opportunities may sometimes remain available long after suppliers recognize the need Benefits: Focuses on customer needs and integrates all the marketing activities that affect customers, thereby meeting the organizational goals by creating long-term customer relationships based on customer value and satisfaction Societal Marketing Belief that marketers should approach consumers as whole human beings with minds, hearts and spirits (continued on next slide)
- Many leading business and marketing thinkers are now preaching the concept of shared value, which recognizes that societal needs, not just economic needs, define markets A growing number of companies known for their hardnosed approaches to business are rethinking the interactions between society and corporate performance. They are concerned not just with short-term economic gains but also with the well-being of their customers, the depletion of natural resources vital to their businesses, the viability of key suppliers, and the economic well-being of the communities in which they produce and sell. One prominent marketer calls this Marketing 3.0. "Marketing 3.0 organizations are values-driven," he says. "I'm not talking about being value-driven. I'm talking about 'values' plural, where values amount to caring about the state of the world." As this slide shows [Figure 1–4 in the text] shows, companies should balance three considerations in setting their marketing strategies: consumer wants, company profits, and society's interests.
- Customer relationship management (CRM) is perhaps the most important concept of modern marketing. In the broadest sense, CRM is the overall process of building and maintaining profitable customer relationships by delivering superior customer value and satisfaction. It deals with all aspects of acquiring, engaging, and growing customers. The key to building lasting customer relationships is to create superior customer value and satisfaction. Satisfied customers are more likely to be loyal customers and give the company a larger share of their business. Customer Value. Attracting and retaining customers can be a difficult task. Customers often face a bewildering array of products and services from which to choose. 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. Depends on the product's perceived performance relative to a buyer's expectations. If the product's performance fails 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 delighted.
- Engaging Customers. Significant changes are occurring in the nature of customer brand relationships. Today's digital technologies—the Internet and the surge in online, mobile, and social media—have profoundly changed the ways that people on the planet relate to one another. In turn, these events have had a huge impact on how companies and brands connect with customers, and how customers connect with and influence each other's brand behaviors. Customer Engagement and Today's Digital and Social Media. The digital age has spawned a dazzling set of new customer relationship-building tools, from Web sites, online ads and videos, mobile ads and apps, and blogs to online communities and the major social media, such as Twitter, Facebook, YouTube, Instagram, and Pinterest. The old marketing involved marketing brands to consumers. The new marketing is customer-engagement marketing fostering direct and continuous customer involvement in shaping brand conversations, experiences, and community. Customer-engagement marketing goes beyond just selling a brand to consumers. Its goal is to make the brand a meaningful part of consumers' conversations and lives. A growing form of customer-engagement marketing is consumer-generated marketing, by which consumers themselves are playing a bigger role in shaping their own brand experiences and those of others. This might happen through uninvited consumer-to-consumer exchanges in blogs, video-sharing sites, social media, and other digital forums. But increasingly, companies themselves are inviting consumers to play a more active role in shaping products and brand content.
- Stew Leonard, who operates a highly profitable four-store supermarket in Connecticut and New York, says he sees $50,000 flying out of his store every time he sees a sulking customer. Why? Because his average customer spends about $100 a week, shops 50 weeks a year, and remains in the area for about 10 years. If this customer has an unhappy experience and switches to another supermarket, Stew Leonard's has lost $50,000 in revenue. Examples: Ritz Carlton Hotels puts the lifetime value of a guest at more than $120,000 Domino's Pizza puts the lifetime value of a customer at more than $10,000
- Stew Leonard, who operates a highly profitable four-store supermarket in Connecticut and New York, says he sees $50,000 flying out of his store every time he sees a sulking customer. Why? Because his average customer spends about $100 a week, shops 50 weeks a year, and remains in the area for about 10 years. If this customer has an unhappy experience and switches to another supermarket, Stew Leonard's has lost $50,000 in revenue. Examples: Ritz Carlton Hotels puts the lifetime value of a guest at more than $120,000 Domino's Pizza puts the lifetime value of a customer at more than $10,000
- A company should develop customer relationships selectively: Figure out which customers are worth cultivating because you can meet their needs more effectively than anyone else. The company can classify customers according to their potential profitability and manage its relationships with them accordingly. One classification scheme defines four relationship groups based on potential profitability and projected loyalty: strangers, butterflies, true friends, and barnacles; see above [Figure 1–5 in the text]. Each group requires a different relationship management strategy. "Strangers" show low potential profitability and little projected loyalty. There is little fit between the company's offerings and their needs. The relationship management strategy for these customers is simple: Don't invest anything in them. "Butterflies" are potentially profitable but not loyal. There is a good fit between the company's offerings and their needs. However, like real butterflies, we can enjoy them for only a short while and then they're gone. "True friends" are both profitable and loyal. There is a strong fit between their needs and the company's offerings. The firm wants to make continuous relationship investments to delight these customers and nurture, retain, and grow them. It wants to turn true friends into "true believers," those who come back regularly and tell others about their good experiences with the company. "Barnacles" are highly loyal but not very profitable. There is a limited fit between their needs and the company's offerings. An example is smaller bank customers, who bank regularly but do not generate enough returns to cover the costs of maintaining their accounts. Like barnacles on the hull of a ship, they create drag. Barnacles are perhaps the most problematic customers. The company might be able to improve their profitability by selling them more, raising their fees, or reducing service to them. However, if they cannot be made profitable, they should be "fired."
- The Changing Marketing Landscape. This section examines the major trends and forces that are changing the marketing landscape and challenging marketing strategy. This includes five major developments: the digital age, the changing economic environment, the growth of not-for-profit marketing, rapid globalization, and the call for more ethics and social responsibility. The digital age: online, mobile, and social media marketing. The explosive growth in digital technology has fundamentally changed the way we live: how we communicate, share information, access entertainment, and shop. The changing economic environment. The new consumer spending values emphasize simpler living and more value for the dollar. Despite their rebounding means, consumers continue to buy less, clip more coupons, swipe their credit cards less, and put more in the bank. Rapid globalization. Today, almost every company, large or small, is touched in some way by global competition. McDonald's now serves 70 million customers daily in more than 36,000 local restaurants in 118 countries worldwide—71 percent of its corporate revenues come from outside the United States. Sustainable marketing. As the worldwide consumerism and environmentalism movements mature, today's marketers are being called on to develop sustainable marketing practices. Cocreation. Cocreation involves the hospitality or travel company interacting with the guest to create experiences through this interaction. The interaction can be passive or active. Visit Houston provides an example of passive co-creation. The management of Visit Houston has grouped activities tourists can experience to create lifestyle itineraries, including "Girlfriends Getaway," "Guy's Weekend," several itineraries for families, and a tour of local breweries. They have developed a total of 17 itineraries based on the interests of the visitor. Someone who enjoys craft beer could follow the itinerary set by Visit Houston or modify the itinerary based on their time and interests. The sharing economy. The recent surge in the sharing economy has been in part to individuals sharing talents, time, and tangible assets they own to gain additional income and the Internet enabling them to connect with customers.