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What Is Marketing?

Marketing is managing profitable customer relationships.

Marketing is creating value and building strong customer relations to capture value from
them.

The twofold goal of marketing is to attract new customers by promising superior

value and keep and grow current customers by delivering satisfaction.

For example, Walmart has become the world’s largest retailer—and the world’s
largest company—by delivering on its promise, “Save money. Live better.” Nintendo
surged ahead in the video-games market behind the pledge that “Wii would like to
play,” backed by its wildly popular Wii console and a growing list of popular games
and accessories for all ages.

Sound marketing is critical to the success of every organization.

but so do not-for-profit organizations

such as colleges, hospitals, museums, symphony orchestras, and even churches.

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Marketing Defined

Many people think of marketing as only selling and advertising.

If the marketer understands consumer needs; develops products that provide

superior customer value; and prices, dis- tributes, and promotes them effectively,
these products will sell easily.

we define marketing as 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

five-step model of 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 consumers, they
in turn capture value from consumers in the form of sales, profits, and long-term
customer equity.
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Understanding the Marketplace and Customer Need

We examine five core customer and marketplace concepts: (1) needs, wants, and
demands; (2) market offerings (products, services, and experiences); (3) value and
satis- faction; (4) exchanges and relationships; and (5) markets.

Customer Needs, Wants, and Demands

Human needs are states of felt deprivation. They include basic physical needs for
food, clothing, warmth, and safety; social needs for belonging and affection; and
individual needs for knowledge and self- expression. Marketers did not create these
needs; they are a basic part of the human makeup

Wants are the form human needs take as they are shaped by culture and individual
personality.

needs food but wants a Big Mac, french fries, and a soft drink.

Wants are shaped by one’s society and are described in terms of objects that will
satisfy those needs. When backed by buying power, wants become demands.

Given their wants and resources, people demand products with benefits that add up
to the most value and satisfaction.

Market Offerings—Products, Services, and Experience

Consumers’ needs and wants are fulfilled through market offerings—some

combination of products, services, information, or experiences offered to a market
to satisfy a need or a want.

Market offerings are not limited to physical products.

They also include services— activities or benefits offered for sale that are essentially
intangible and do not result in the ownership of anything

Examples include banking, airline, hotel, tax preparation, and home repair services.

More broadly, market offerings also include other entities, such as persons, places,
organizations, information, and ideas

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Many sellers make the mistake of paying more attention to the specific products
they of- fer than to the benefits and experiences produced by these products.
These sellers suffer from marketing myopia.

hey are so taken with their products that they focus only on existing wants and lose
sight of underlying customer needs.

Customer Value and Satisfaction

Consumers usually face a broad array of products and services that might satisfy a
given need. How do they choose among these many market offerings?
Customers form expecta- tions about the value and satisfaction that various market
offerings will deliver and buy ac- cordingly

Satisfied customers buy again and tell others about their good experiences.
Dissatisfied customers often switch to competitors and disparage the product to
others.

Marketers must be careful to set the right level of expectations. If they set
expectations too low, they may satisfy those who buy but fail to attract enough
buyers.

If they set expec- tations too high, buyers will be disappointed.

Customer value and customer satisfaction are key building blocks for developing
and managing customer relationships.

Exchanges and Relationships

Exchange is the act of obtaining a desired object from someone by offering some-
thing in return. In the broadest sense, the marketer tries to bring about a response
to some market offering.

The response may be more than simply buying or trading products and services. A
political candidate, for instance, wants votes, a church wants membership, an or-
chestra wants an audience, and a social action group wants idea acceptance.

Marketing consists of actions taken to build and maintain desirable exchange

relationships with target audiences involving a product, service, idea, or other
object.

Marketers want to build strong relationships by consis- tently delivering superior

customer value.

Markets

The concepts of exchange and relationships lead to the concept of a market.

A market is the set of actual and potential buyers of a product or service.

These buyers share a particular need or want that can be satisfied through
exchange relationships.

Marketing means managing markets to bring about profitable customer

relationships. However, creating these relationships takes work.

Sellers must search for buyers, identify their needs, design good market offerings,
set prices for them, promote them, and store and deliver them.

Activities such as consumer research, product development, communication,

distribution, pricing, and service are core marketing activities.

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Designing a Customer-Driven Marketing Strategy

 We define marketing management as the art and science of choosing target
markets and building profitable relationships with them.

The marketing manager’s aim is to find, attract, keep, and grow target customers by
creating, delivering, and communicating superior customer value.

Selecting Customers to Serve

Target market, who are they? and how to serve them.

The company must first decide whom it will serve. It does this by dividing the market
into segments of customers (market segmentation) and selecting which segments it
will go after (target marketing).

By trying to serve all customers, they may not serve any customers well.

Instead, the company wants to select only customers that it can serve well

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Choosing a Value Proposition

The company must also decide how it will serve targeted customers—how it will
differentiate and position itself in the mar- ketplace.

A brand’s value proposition is the set of benefits or values it promises to deliver to

consumers to satisfy their needs.

mostly in taglines of a brand, for example “I’m lovin it” or “Redbull gives you wings”

Marketing Management Orientations

Marketing management wants to design strategies that will build profitable

relationships with target consumers.

There are five alternative concepts under which organizations design and carry out
their marketing strategies: the production, product, selling, marketing, and societal
marketing concepts.

The Production Concept

The production concept holds that consumers will favor products that are available
and highly affordable.

The idea that consumers will favor products that are available and highly affordable and
that the organization should therefore focus on improving production and distribution
efficiency.

Therefore, management should focus on improving production and dis- tribution

efficiency.

This concept is one of the oldest orientations that guides sellers.

However, al- though useful in some situations, the production concept can lead to
marketing myopia.
 Companies adopting this orientation run a major risk of focusing too narrowly on
their own operations and losing sight of the real objective—satisfying customer
needs and building customer relationships.

The Product Concept

The product concept holds that consumers will favor products that offer the most in
qual- ity, performance, and innovative features. Under this concept, marketing
strategy focuses on making continuous product improvements.

The idea that consumers will favor products that offer the most quality, performance,
and features and that the organization should therefore devote its energy to making
continuous product improvements.

Product quality and improvement are important parts of most marketing strategies.
However, focusing only on the company’s products can also lead to marketing
myopia

buyers are looking for a better solution but not necessarily for a better product.

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The Selling Concept

The idea that consumers will not buy enough of the firm’s products unless it undertakes
a large-scale selling and promotion effort.

holds that consumers will not buy enough of the firm’s products unless it
undertakes a large-scale selling and promotion ef- fort.

The selling concept is typically practiced with unsought goods—those that buyers
do not normally think of buying, such as insurance or blood donations.

These industries must be good at tracking down prospects and selling them on a
product’s benefits.

Such aggressive selling, however, carries high risks.

It focuses on creating sales trans- actions rather than on building long-term,

profitable customer relationships

The aim often is to sell what the company makes rather than making what the
market wants. It assumes that customers who are coaxed into buying the product
will like it. Or, if they don’t like it, they will possibly forget their disappointment and
buy it again later.

The Marketing Concept

A philosophy that holds that achieving organizational goals depends on knowing the
needs and wants of target markets and delivering the desired satisfactions better than
competitors do.

Under the marketing concept, customer focus and value are the paths to sales and
profits.
 Instead of a product-centered “make and sell” philosophy, the marketing concept is
a customer-centered “sense and respond” philosophy.

The job is not to find the right customers for your product but to find the right
products for your customers.

Implementing the marketing concept often means more than simply responding to
cus- tomers’ stated desires and obvious needs. Customer-driven companies
research current cus- tomers deeply to learn about their desires, gather new
product and service ideas, and test proposed product improvements.

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In many cases, however, customers don’t know what they want or even what is
possible.

For example, even 20 years ago, how many consumers would have thought to ask
for now-commonplace products such as notebook computers, cell phones, digital
cameras, 24-hour online buying, and satellite navigation systems in their cars?

Such situations call for customer-driving marketing—understanding customer needs

even better than customers themselves do and creating products and services that
meet existing and latent needs, now and in the future

The Societal Marketing Concept

The idea that a company’s marketing decisions should consider consumers’ wants, the
company’s requirements, consumers’ long-run interests, and society’s long-run
interests.

The societal marketing concept holds that market- Societal marketing concept The
idea that a company’s marketing decisions should consider consumers’ wants, the
company’s requirements, consumers’ long-run interests, and society’s long-run
interests. ing strategy should deliver value to customers in a way that maintains or
improves both the consumer’s and society’s well-being.

It calls for sustainable marketing, socially and environ- mentally responsible

marketing that meets the present needs of consumers and businesses while also
preserving or enhancing the ability of future generations to meet their needs.

for exapmle: sapphire’s shopping bags that can be used to plant trees or the concept of
mental straws.

companies should balance three considerations in setting their marketing

 strategies: company profits, consumer wants, and society’s interests.

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Preparing an Integrated Marketing Plan and Program

The company’s marketing strategy outlines which customers it will serve and how it
will create value for these customers.

Next, the marketer develops an integrated marketing pro- gram that will actually
deliver the intended value to target customers.

The marketing pro- gram builds customer relationships by transforming the

marketing strategy into action.

It consists of the firm’s marketing mix, the set of marketing tools the firm uses to
implement its marketing strategy.

The major marketing mix tools are classified into four broad groups, called the four
Ps of marketing: product, price, place, and promotion.

To deliver on its value proposition, the firm must first create a need-satisfying
market offering (product)

It must decide how much it will charge for the offering (price) and how it will make
the offering available to target consumers (place). Finally, it must communicate with
target customers about the offering and persuade them of its merits (promotion).

Building Customer Relationships

The first three steps in the marketing process—understanding the marketplace and
cus- tomer needs, designing a customer-driven marketing strategy, and
constructing a market- ing program—all lead up to the fourth and most important
step: building profitable customer relationships.

Customer Relationship Management

The overall process of building and maintaining profitable customer relationships by

delivering superior customer value and satisfaction.

Some marketers define it narrowly as a customer data management activity (a

 practice called CRM).

By this definition, it involves managing detailed information about individ- ual

customers and carefully managing customer “touchpoints” to maximize customer
loy- alty.

It deals with all aspects of acquiring, keeping, and growing customers.

Relationship Building Blocks: Customer Value and Satisfaction

Satisfied customers are more likely to be loyal customers and give the company a
larger share of their business

Customers of- ten 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

Customer-perceived value

The customer’s evaluation of the difference between all the benefits and all the costs of
a marketing offer relative to those of competing offers.

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Importantly, customers often do not judge values and costs “accurately” or

“objectively.” They act on perceived value.

To some consumers, value might mean sensible products at affordable prices,

especially in the aftermath of recent recession.

To other consumers, however, value might mean pay- ing more to get more.

Customer Satisfaction

The extent to which a product’s perceived performance matches a buyer’s

expectations.

If the product’s performance falls short of expec- tations, the customer is

dissatisfied.

If performance matches expectations, the customer is satisfied. If performance

exceeds expectations, the customer is highly satisfied or delighted.

Most studies show that higher levels of customer satisfaction lead to greater cus-
tomer loyalty, which in turn results in better company performance.

Smart companies aim to delight customers by promising only what they can deliver
and then delivering more than they promise.

Delighted customers not only make repeat purchases but also become willing
marketing partners and “customer evangelists” who spread the word about their
good experiences to others

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However, although a customer-centered firm seeks to deliver high customer
satisfac- tion relative to competitors, it does not attempt to maximize customer
satisfaction.

A com- pany can always increase customer satisfaction by lowering its price or
increasing its services.

But this may result in lower profits. Thus, the purpose of marketing is to gener- ate
customer value profitably.

This requires a very delicate balance: The marketer must continue to generate more
customer value and satisfaction but not “give away the house.”

Customer Relationship Levels and Tools

Companies can build customer relationships at many levels, depending on the

nature of the target market.

At one extreme, a company with many low-margin customers may seek to develop
basic relationships with them.

For example, Nike does not phone or call on all of its consumers to get to know
them personally. Instead, Nike creates relationships through brand-building
advertising, public relations, and its Web site (www.Nike.com).

At the other extreme, in markets with few customers and high margins, sellers want
to create full part- nerships with key customers.

For example, Nike sales representatives work closely with the Sports Authority,
Dick’s Sporting Goods, Foot Locker, and other large retailers.

In between these two extremes, other levels of customer relationships are

appropriate.

Beyond offering consistently high value and satisfaction, marketers can use specific
marketing tools to develop stronger bonds with customers.

For example, many companies offer frequency marketing programs that reward
customers who buy frequently or in large amounts