Marketing creating and capturing customer value

PRINCIPLES OF MARKETING - MRKT 209 - 2016. DR. AHMAD FARAZ – CBA - UOD
Marketing: Creating & Capturing Customer Value
Background, Introduction, Marketing Process.
Lecture
1

What is a Market

Back Ground
 The term “marketing” is derived from the word
market, which refers to a group of sellers and
buyers that co-operate to exchange goods and
services.
 The modern concept of marketing evolved during
and after the industrial revolution in the 19th and
20th centuries.
 Today “marketing” is a humanistic subject, a force
that shaped our wants & created our life style

Marketing evolutions
Production-oriented era
Sales-oriented era
Market-oriented era
Value-based marketing era

What is Marketing

What is Marketing
Marketing means when customers know all about your product, choose it over
the competition and then keep coming back to buy more. When they love your
product enough to recommend you to friends.
When the bee finds a great source of nectar it uses the waggle dance to let all the
other bees know where to go. Customers are the same.
That’s how marketing works.

Marketing is managing profitable customer relationship
Marketing is not about you.
It is about your customers.
It is not about how great
your business is.
It is about the needs your
customer have.
SELLING is Marketing
But, MARKETING is not Selling
What is Marketing

Definition of Marketing?
“The process of planning and executing the
conception, pricing, promotion and distribution of
ideas, goods and services to create exchanges that
satisfy individual and organizational objectives.”

“The management process responsible for
identifying, anticipating and satisfying customer
requirements profitably."

“Satisfying needs and wants through an exchange
process”
Marketing is a process by which companies create
value for customers and build strong customer
relationships to capture value from customers in
return.

Marketing, Selling & Merchandizing
 Marketing is a broader concept which is driven from customer’s
demand.
 Selling is one part of marketing which deals with persuading
customers to buy products that are available with seller.
 Merchandizing refers to the process offering a variety of products to
a retail consumer in a manner which stimulates demand.
Differentiating Marketing

Why SALES is not Marketing
Marketing Sales
Period A modern concept A traditional concept
Approach
Determine future needs and has a
strategy in place to meet those needs for
the long term relationship.
Makes customer demand match the
products the company currently offers.
Focus
Fulfill customer's wants and needs thru
products or services the company
can offer. Building relationship.
Fulfill sales volume objectives.
Make money.
Horizon An investment, Longer term results Looks profitable but Short term
Scope
Products are tailor made as per customer
needs (market research), products satisfy
those needs.
Promotions to advertise those products.
Customers don’t have much input,
product is created for as per company's
idea. They persuade the customer
to purchase the product to fulfill her
needs.

Marketing Sales
Strategy Pull Push
Concept Marketing is a wider concept Sales is a narrower concept
Priority
Marketing shows how to reach to
the Customers and build long
lasting relationship
Selling is the ultimate result of
marketing.
Identity
Marketing targets the construction of a
brand identity so that it becomes easily
associated with need fulfillment.
Sales is the strategy of meeting needs in
an opportunistic, individual method,
driven by human interaction. There's no
premise of brand identity, longevity or
continuity. It's simply the ability to meet a
need at the right time.
Why SALES is not Marketing (cont.)

Why Marketing?
• IMPORTANCE OF MARKETING
1. Marketing helps to achieve, maintain and raise the
standards of living
- Marketing is means through which production and purchasing
power are converted into consumption.
- Better marketing  Mass production  Low cost 
More buying power  Higher standard of living.
2. Marketing increases employment opportunities
- Marketing functions / sub-functions (Buying, Selling, Transport,
Warehousing, Financing, Risk management etc)
- These functions create need for different specializations
- About 30-40% population depends directly or indirectly on
marketing

Why Marketing?
3. Marketing increases national income
- More purchasing power  increase in national income
4. Helps maintain economic stability & development
- By maintaining demand and supply balance
5. Link between producer & consumer
6. Removes imbalance of supply & demand by
transferring surpluses
7. Marketing promotes product awareness to the public
Marketing Promotes Product Awareness to
the Public

Why Marketing?
9. Marketing helps decision making process (what, when
& how much to produce, store or transport)
10. Helps change management & innovations
8. Marketing generates revenue, by generating sales &
thereby profits

Marketing is defined
Marketing is more than selling and advertising.
Old understanding of Marketing was, Telling & Selling.
New sense of Marketing is, Satisfying customer needs.
Marketing is more than selling and advertising.

Marketing process
A process by which companies create value for customers
and build strong relationships in order to capture value from
customers.

Understanding Marketplace & Customer needs
To understand our customers, their needs and wants and the
market place where they operate, must observe five core
customer and marketing concepts.
 Customer needs, wants & Demands.
 Market offerings – product services & experiences
 Customer value & satisfaction
 Exchange and relationships
 Markets

Needs - state of felt deprivation including physical, social, and individual
needs. Needs are basic requirements of life; things necessary for survival.
Understanding NEED
 Physical:
Food, clothing, shelter, safety
 Social:
Belonging, affection
 Individual:
Learning, knowledge, self-
expression

Understanding Primary & Secondary NEEDS
Primary needs are biological or physical needs that are
essential to life. (water, food, clothing and shelter).
Secondary needs are wants or acquired needs they are more
likely desires. (safety, love, respect, creativity)

Wants – a form of human need, shaped by culture & individual personality
Every thing that is desirable but
not necessary in order to survive
is a WANT.
Understanding WANTS

Understanding DEMAND
Demand – is just more than the desire to have something.
A want supported by the willingness & ability to buy makes a demand for any
product or service.
Demand
Any type of want Buying power
If a person wants a luxury car but unable to pay for it, than there is no
demand from his side. The relationship between the price and quantity
demanded is known as demand.

Understanding MARKET OFFERINGS
Market offerings are some
combination of products, services,
information, or experiences offered
to a market to satisfy its needs or
wants.
Market Offerings: Products, Services & Experiences
Marketing myopia is mistake of
focusing only on existing wants
and losing sight of underlying
consumer needs.

Understanding customer VALUE & SATISFACTION
Customer value & satisfaction
Customers
• Value and satisfaction
Marketers
• Set the right level of expectations
• Not too high or low

Understanding EXCHANGE & RELATIONSHIP
Exchange and relationship
The act of obtaining a desired object from someone by
offering something in return. Marketers aim at building strong
relationships by consistently delivering superior customer
value.
Exchange is one of the four ways people can obtain products.
a. Self production.
b. Coercion.
c. Begging.
d. Exchange.

Five conditions of exchange.
1. At least two parties.
2. Each party has something that might be of value to the
other party.
3. Each party is capable of communication & delivery.
4. Each party is free to accept or reject the offer.
5. Each party believes it is appropriate or desirable to deal
with the other party.
Understanding EXCHANGE & RELATIONSHIP

 Markets
It consists of all potential consumers sharing a
particular need or want who might be willing & able to
engage in exchange to satisfy that need or want.
Understanding MARKETS
A market is the set of actual and potential buyers of a product.

Marketing Concepts
Production
concept
Product
concept
Selling
concept
Marketing
concept
Societal
concept
Marketing management design strategy that built profitable
relationship with target consumers.
Five alternative concepts under which organizations design
and carry out their marketing strategies.

Production concept is the idea that consumers will favor
products that are available and highly affordable.
Marketing Concept PRODUCTION
Production in large volume, at low cost will be acceptable to
customers.

Marketing Concept PRODUCT
Product concept is the idea that consumers will favor products
that offer the most quality, performance, and features.
An organization should therefore devote its energy to making
continuous product improvements.
 Focuses on design and quality of products
 Believes that customers will automatically buy products
of high quality
 R&D is essential element
 Do not bother to study the market & consumer in depth

Selling concept is the idea that consumers will not buy enough
of the firm’s products unless it assumes a large scale selling
and promotion effort.
Marketing Concept SELLING

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
the competition.
Concept MARKETING
Marketing concept is a customer centric “sense and respond”.
 The job is not to find the right customers for the product but
to find the right products for your customers.
 In return it generates profits by developing long lasting
relationships with the right customer based on customer
value and satisfaction.

Societal Marketing
Societal marketing concept
is the idea that a company’s marketing
decisions should consider consumers’
wants, the company’s requirements,
consumers’ long-term interests, and
society’s long-term interests.

Customer Loyalty & Retention
Customer lifetime value is the value of the entire stream of
purchases that the customer would make over a lifetime of
patronage. Loyalty programs tracks consumer purchases and
provides estimates of Customer Lifetime Value.
Motivate repeat buying by providing
rewards to customers based on how
much business they do with the
company

CRM

 The way company decides to serve its targeted customers
and how to differentiate and position itself in the market.
Choosing a VALUE PROPOSITION
 Value proposition is those benefits that are promised to
the customers to satisfy their needs.
“The Ultimate Driving Machine”
“Touching is believing”

Customer Value Proposition (CVP)
 Offer the right product
 To your target customers
 At a price that is acceptable to them
 Based on their perception of the value
 At a cost that gives you a profit

Next CLASSBuilding CUSTOMER EQUITY
it is important to develop and grow the customers because
the customersyou have nowand the ones youwill have in the future
will create value for your company. There is no business
without customers.
FedEx recognizes the value of
customer loyalty and retention.
They are transforming the
industry approach to delivering
the packages by air.
Customer Equity is the total combined customer lifetime value of all the
company’s current and potential customers. The ultimate aim of CRM is
to develop high level of customer equity.

Rapid Globalization
Ethics & Social
Responsibility
Not-for-Profit
Marketing
Changing
Economic
Environment
The
Digital Age
The changing MARKETING LANDSCAPE

Next CLASSThe changing MARKETING LANDSCAPE
The
Digital Age

 The recent technology boom has
had a major impact on the ways
marketers connect with and
bring value to their customers.
 Fundamentally changed the way
we live.
New DIGITAL AGE
 Today marketers creating new
products and services by
learning and tracking customers
and matching their needs.

New DIGITAL AGE
 Marketers are communicating
with customers as one-to-one.
 Online marketing is the fastest
growing form of marketing.
YEAR Users Population % Pop.
2000 200,000 21,624,422 0.9 %
2003 1,500,000 21,771,609 6.9 %
2005 2,540,000 23,595,634 10.8 %
2007 4,700,000 24,069,943 19.5 %
2009 7,761,800 28,686,633 27.1 %
2010 9,800,000 25,731,776 38.1 %
2012 13,000,000 26,534,504 49.0 %
 Presently Online business
transections are more than
$5 trillion.
 Both genders are equally
adopting the technological
advancement.

Changing
Economic
Environment

 Beginning 2008, the US and world economic
experienced a great recession, stock markets,
banks and business plunged, trillion of dollars
market value simply evaporated.
Changing ECONOMC ENVIRONMENT
 Many consumers rethink their spending priorities and cur back their
buying. Changed their buying habits and consumption patterns.
 In response, all industries aligned their marketing strategies as,
PayLess – Expect More.
 Smart companies and marketers build market
share and strengthen customer relationship at
the expense of competitors who cut back
marketing cost.
 In stead of slashing prices, they created value
why their brands worth it.

Rapid Globalization

 World is transforming into a global village.
Today almost every company is touched in
some way by Global competition.
RapidGLOBALIZATION
 Today, companies are not only trying to sell
more of their locally produced goods in
international markets, they are also buying
more supplies and components from
abroad.
Globalizations is dominating the world
since the 19th century. The term implies
worldly combination of various cultures,
styles, economic policies, ideas, etc. It
must not be confused with “making things
common around the world”.

RapidGLOBALIZATION
 McDonald’s is one of the most popular fast food
restaurants in Kingdom of Saudi Arabia.
 Today, companies are not only selling more of their
locally produced goods in international markets but
also buying more supplies and components abroad.
 US companies are facing competition from
Asian companies such as; Toyota, Nokia,
Nestle, Sony and Samsung.

Ethics & Social
Responsibility

Ethics & SOCIAL RESPONSIBILITY
 Marketers always value relationships, same as the one we have with
this Earth. Today marketing are developing and addressing
sustainable marketing practices.
 Marketing also highlighted, Corporate ethics and
social responsibility.
 Today companies can not ignore the environment
and society. Even customers expect companies to
deliver value in a socially and environmentally
responsible way..
 Some companies budging only when
forced by legislation or organized
consumer outcries. More forward-
looking companies, however, readily
accept their responsibility.

Not-for-Profit
Marketing

 In recent years, marketing also has become a major part of the
strategies of many not-for profit organizations (colleges, hospitals,
museums, zoos, music clubs and even churches).
 Government agencies have also shown an increased interest in
 Marketing (U.S. military attract recruits).
 Government developing social marketing campaigns to encourage
energy conservation, environment concerns, anti-smoking,
excessive drinking, child labor and drug use.
Marketing Not-For-PROFIT

KEY LEARNINGS
 Marketing is the process of building profitable customer
relationships by creating value for customers and capturing value
in return.

 Perhaps the most important step in the marketing process involves
building value based profitable relationships with target customers.
 Marketing creates customer satisfaction and delight.
 Marketing process create value for customers. In the final step, the
company win the rewards of its strong customer relationships by
capturing value from customers.
 Finally, today’s marketing and companies must take into account
three additional factors. In building customer and partner
relationships, they must harness marketing technology, take
advantage of global opportunities, and ensure that they do business
in an ethical and socially responsible way.
KEY LEARNINGS

Goals of Marketing
Marketing is
managing profitable customer relationships.
Goals:
1. Attract new customers by promising superior value.
2. Keep and grow current customers by delivering satisfaction

Marketing terms
 Markets.
It consists of all potential consumers sharing a particular need or
want who might be willing & able to engage in exchange to satisfy
that need or want.
 Marketing.
It means Working with markets to actualize potential exchanges for
the purpose of satisfying human needs & wants.
 Marketer.
It means someone seeking a resource from someone else &
willing to offer something of value in exchange.
 Market offerings
are some combination of products, services, information, or
experiences offered to a market to satisfy its needs or wants.
 Marketing myopia
is focusing only on existing wants and losing sight of underlying
consumer needs.

Marketing creating and capturing customer value

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