CHAPTER 1

MARKETING: CREATING CUSTOMER

VALUE AND ENGAGEMENT
Amazon dominates the online marketplace
by creating a world-class online buying
experience that helps customers to “find and
discover anything they might want to buy
online.”

Facebook has attracted more than 2 billion

active web and mobile users worldwide by
helping them to “connect and share with the
people in their lives.”
 WHAT IS MARKETING?

➢ Marketing is engaging customers and managing profitable

customer relationships.

The twofold goal of marketing is to attract new customers by

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➢
promising superior value and to keep and grow current customers by
delivering satisfaction.

➢ Sound marketing is critical to the success of every organization.

Large for-profit firms, such as Google, Target, Procter & Gamble,
Coca-Cola, and Microsoft, use marketing. But so do not-for-profit
organizations, such as colleges, hospitals and even museum.
• Marketing comes to you in the good old traditional forms: You see it
in the abundance of products at your nearby shopping mall and the
ads that fill your TV screen, spice up your magazines, or stuff your
mailbox.

• But in recent years, marketers have assembled a host of new

marketing approaches, everything from imaginative Web sites and
smartphones apps to blogs, online videos, and social media.

• These new approaches do more than just blast out messages to the
masses. They reach you directly, personally, and interactively.
Today’s marketers want to become a part of your life and enrich your
experiences with their brands.
 MARKETING DEFINED

• Broadly defined, marketing is a social and managerial process by

which individuals and organizations obtain what they need and
want through creating and exchanging value with others.

• In a narrower business context, marketing involves building

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profitable, value-laden exchange relationships with customers.

• Hence, we define marketing as the process by which companies

engage customers, build strong customer relationships, and
create customer value in order to capture value from customers
in return.
 THE MARKETING PROCESS:
CREATING AND CAPTURING CUSTOMER
VALUE
• In the first four steps (1-4), companies work to understand
consumers, create customer value and build strong customer
relationships.

• In the final step (5), 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.
 1) UNDERSTANDING THE MARKETPLACE
AND CUSTOMER NEEDS
• As a first step, marketers need to understand customer needs and
wants and the marketplace within which they operate.

• We now examine five core customer and marketplace concepts:

a) Needs, wants and demands
b) Marketing offerings (products, services and experiences)
c) Value and satisfaction
d) Exchanges and relationships
e) Markets
 a) Customer needs, wants and demands
• The most basic concept underlying marketing is that of human needs.

• 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. These
needs were not created by marketers; they are a basic part of the human
make-up.

• Wants are the form human needs take as they are shaped by culture and
individual personality. A hungry person needs food but wants a Big Mac,
fries and soft drink. Wants are shaped by one’s society and are described in
terms of objects that will satisfy 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.
 b) Market offerings – products, services and
experiences
• Consumers’ needs and wants are fulfilled through a market offerings – some
combination of products, services , information or experiences offered to a
market to satisfy a need or want.

• Market offerings are not limited to physical products. They also includes
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, retailing, and home repair services.

• More broadly, market offerings also include other entities such as persons,
places, organizations, information and ideas.
• Many sellers make the mistake of paying more attention to the specific
products they offer than to the benefits and experiences produced by these
products - these sellers suffer from marketing myopia.

• They are so taken with their products that they focus only on existing wants
and lose sight of underlying customer needs. They forget that a product is
only a tool to solve a consumer problem.

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• Smart marketers look beyond the attributes of the products and services they
sell.

• By orchestrating several services and products, they create brand

experiences for consumers.

• For example, Mattel’s American Girl does much more than just make and sell
high-end dolls. It creates special experiences between the dolls and the girls
who adore them.
 c) Customer value and satisfaction

• Customers form expectations about the value and satisfaction that various
market offerings will deliver and buy accordingly.

• 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 expectations too high, buyers will be disappointed.

• Customer value and customer satisfaction are key building blocks for
developing and managing customer relationships.
 Perceived
< Buyer expectations = Dissatisfied buyer
performance

Perceived
= Buyer expectations = Satisfied buyer
performance

Perceived
> Buyer expectations = Delighted buyer
performance
 e) Markets

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

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

• Sellers must search for and engage buyers, identify their needs, design good
market offerings, set prices for them, promote them, and store and deliver
them.
 d) Exchanges and relationships

• Marketing occurs when people decide to satisfy their needs and wants
through exchange relationships.

• Exchange is the act of obtaining a desired object from someone by offering

something in return. (Seller & Buyer)

• Marketing consists of actions taken to create, maintain and grow desirable

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

• Companies want to build strong relationships by consistently delivering

superior customer value.
 2) DESIGNING A CUSTOMER VALUE-
DRIVEN MARKETING STRATEGY
• Marketing management is the art and science of choosing target markets
and building profitable relationships with them.

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

• To design a winning marketing strategy, the marketing manager must answer

two important questions:
• What customers will serve (whats’s our target market)?
• How can we serve these customers best (what’s our value proposition)?
• Selecting customers to serve

• 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).

• Marketing managers know that they cannot serve all customers in every
way. 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 and profitably.

• Ultimately, marketing managers must decide which customers they want

to target and on the level, timing, and nature of their demand.
• Choosing a value proposition

• The company must also decide how it will serve targeted customers – how
it will differentiate and position itself in the marketplace.

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

deliver to consumers to satisfy their needs.

• Example: Facebook helps you “connect and share with the people in your
life”.

• Such value propositions differentiate one brand from another. They

answer the customer’s question: Why should I buy your brand rather than
a competitor’s?

• Companies must design strong value propositions that give them the
greatest advantage in their target markets.
• Marketing management orientations

• Marketing management wants to design strategies that will engage target

customers and build profitable relationships with them.

• There are five alternative concepts under which organizations design and
carry out their marketing strategies:
• Production concept
• Product concept
• Selling concept
• Marketing concept
• Societal marketing concept
• Production concept: the idea that consumers will favor products that are
available and highly affordable; therefore, the organization should focus on
improving production and distribution efficiency.

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

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

• Marketing concept: a philosophy in which achieving organizational goals

depends on knowing the needs and wants of target markets and delivering
the desired satisfactions better than competitors do.
• 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.
 3) 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 program that will

actually deliver the intended value to target customers.

• The marketing program builds customer relationships by transforming the

marketing strategy into action.

• It consists of the firm’s marketing mix (4Ps), the set of marketing tools the
firm uses to implement its marketing strategy.
MARKETING MIX
• To deliver on its value proposition, the firm must first create a need-
satisfying market offering (product).

• It must then 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 engage target consumers, communicate about the offering,

and persuade consumers of the offer’s merits (promotion).

• The firm must blend each marketing mix tool into a comprehensive
integrated marketing program that communicates and delivers the
intended value to chosen customers.
 4) ENGAGING CUSTOMERS AND
MANAGING CUSTOMER RELATIONSHIPS
• Customer relationship management

• Customer relationship management is the overall process of building

and maintaining profitable customer relationships by delivering superior
customer value and satisfaction.

• It deals with all aspect of acquiring, engaging, and growing customers.

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

• Many companies offer frequency marketing programs that reward

customers who buy frequently or in large amounts.

• Other companies sponsor club marketing programs that offer members

special benefits and create member communities.
• Engaging customers

• Today’s companies are using online, mobile and social media to refine
their targeting and to engage customers more deeply and interactively.

• The new marketing is customer-engagement marketing – fostering

direct and continuous customer involvement in shaping brand
conversations, brand experiences, and brand 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.

• Example:
• Social Media Campaigns - Encourage customers to share their
experiences with your brand on social media platforms.
• Live Events and Webinars - Host live events or webinars where
customers can interact with your brand in real-time.
• Email Marketing - Personalize email campaigns based on customer
preferences and behaviors.
5) CAPTURING VALUE FROM CUSTOMERS

• The final step involves capturing value in return in the form of sales, market
share, and profits.

• By creating superior customer value, the firm creates highly satisfied

customers who stay loyal and buy more. This, in return, means greater long-
run returns for the firm.
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• Customer lifetime value is the value of the entire stream of purchases that
the customer would make over a lifetime of patronage.

• Beyond simply retaining good customers to capture customer lifetime value,

good customer relationship management can help marketers increase their
share of customer - the share they get of the customer’s purchasing in their
product categories.
Building the Right Relationships with the Right
Customers

Customer Relationship Groups

• Strangers: show low potential profitability and little projected loyalty.
There is little fit between the company’s offerings and their needs.

• Butterflies: are potentially profitable but not loyal. There is a good fit
between the company’s offerings and their needs.

• True friends: are both profitable and loyal. There is a strong fit between
the company’s offerings and their needs.

• Barnacles: are highly loyal but not very profitable. There is a limited fit
between the company’s offerings and their needs.

Different types of customers require different engagement and

relationship management strategies. The goal is to build the
right relationships with the right customers.
 THE CHANGING MARKETING
LANDSCAPE
• Every day, dramatic changes are occurring in the market place.

• In this section, we examine the major trends and forces that are changing the
marketing landscape and challenging marketing strategy.

• We look at five major developments:

a) The digital age
b) The changing economic environment
c) The growth of not-for-profit marketing
d) Rapid globalization
e) Sustainable marketing – the call for more environmental and
social responsibility
a) 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.

• Digital and social media involves using digital marketing tools such as
Web sites, social media, mobile ads and apps, online video, email, blogs,
and other digital platforms to engage consumers anywhere, anytime via
the computers, smartphones, tablets, Internet-read TVs and other digital
devices.

• At the most basic level, marketers set up company and brand Web sites
that provide information and promote the company’s products.
• Beyond brand Web sites, most companies are also integrating social and
mobile media into their marketing mixes.

• It’s hard to find a brand Web site, or even a traditional media ad, that
doesn’t feature links to the brand’s Facebook, Twitter, Google+, LinkedIn,
YouTube, Instagram, Pinterest or other social media sites.

• Social media provide exciting opportunities to extend customer

engagement and get people talking about a brand.

• Some social media are huge – Facebook has more than billion active
monthly members. Twitter has more than 232 million active users;
Pinterest draws in 53 million users; and Instagram racks up an estimated
300 million active monthly visitors.
• Mobile marketing is perhaps the fastest-growing digital marketing
platform.

• Four out of five smartphone users use their phones to shop – browsing
product information through apps or the mobile Web, making in-store
price comparisons, reading online product reviews, finding and redeeming
coupons, and more.

• Smartphones are ever present, always on, finely targeted, and highly
personal.

• This makes them ideal for engaging customers anytime, anywhere as they
move through the buying process.

• For example, Starbucks customer can use their mobile devices for
everything from finding the nearest Starbucks and learning about new
products to placing and paying for orders.
b) The Changing Economic Environment

• The Great Recession caused many consumers to rethink their spending

priorities and cut back on their buying.

• In adjusting to the new economy, companies may be tempted to cut their

marketing budgets and slash prices in an effort to coax more frugal
customers into opening their wallets.

• Thus, rather than slashing prices in uncertain economic times, many

marketers hold the line on prices and instead explain why their brands are
worth it.
c) The Growth of Not-for-Profit Marketing

• In recent years, marketing has also become a major part of the strategies
of many not-for-profit organizations, such as colleges, hospitals,
museums, zoos, and symphony orchestras.

• The nation’s not-for-profits face stiff competition for support and

membership.

• For example, Alex’s Lemonade Stand Foundation (ALSF) effectively

markets its mission of “Fighting childhood cancer, one cup at a time.”
ALSF has raised more than $100 million for pediatric cancer research.
d) Rapid Globalization

• Today, almost every company, large or small, is touched in some way by

global competition.

• American firms have been challenged at home by the skillful marketing of

European and Asian multinationals. Companies such as Toyota, Nestle
and Samsung have often outperformed their U.S competitors in American
markets.

• Today, companies are not just selling more of their locally produced goods
in international markets; they are also sourcing more supplies and
components abroad and developing new products for specific markets
around the world.
e) Sustainable marketing – the call for more environmental and social
responsibility

• Corporate ethics and social responsibility have become hot topics for
almost every business.

• Today’s customers expect companies to deliver value in socially and

environmentally responsible way.

• Some companies resist these movements, budging only when forced by

legislation or organized consumer outcries.

• Forward-looking companies, however, readily accept their responsibilities

to the world around them. They view sustainable marketing as an
opportunity to do well by doing good. They seek ways to profit by serving
immediate needs and the best long-run interests of their customers and
communities.
 SO, WHAT IS MARKETING?
PULLING IT ALL TOGETHER