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Chapter 1

Marketing is managing profitable customer relationships. The twofold goal of marketing is to attract
new customers by promising superior value and keep and grow current customers by delivering
satisfaction. marketing must be understood not in the old sense of making a sale—“telling and
selling”—but in the new sense of satisfying customer needs. 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.

(1) needs, wants, and demands; (2) market offerings (products, services, and experiences); (3) value
and satis- faction; (4) exchanges and relationships; and (5) markets.

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.
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.

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

marketing myopia - is a lack of insight into what a business is doing for its customers. Organizations
invest so much time, energy, and money in what they currently do that they're often blind to the
future.

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.

Marketing consists of actions taken to build and maintain desirable exchange relationships with
target audiences involving a product, service, idea, or other object.

Marketing means managing markets to bring about profitable customer relationships. Activities such
as consumer research, product development, communication, distribution, pricing, and service are
core marketing activities. today’s marketers must also deal effectively with customer-managed
relationships.

Marketing involves serving a market of final consumers in the face of competitors. The company and
com- petitors research the market and interact with consumers to understand their needs. The
arrows represent relation-
ships that must be developed
and managed. A company’s
success at building prof- itable
relationships depends not only
on its own actions but also on
how well the entire system
serves the needs of final
consumers.

Marketing management-

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 management is customer management and demand management.
Companies must design strong value propositions that give them the greatest advantage in their
target markets.

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 holds that consumers will favor products that are available and highly
affordable. Therefore, management should focus on improving production and distribution
efficiency. the production concept can lead to marketing myopia.

The product concept holds that consumers will favor products that offer the most in quality,
performance, and innovative features. Under this concept, marketing strategy focuses on making
continuous product improvements. However, focusing only on the company’s products can also
lead to marketing myopia.

Many companies follow the selling concept, which holds that consumers will not buy enough of
the firm’s products unless it undertakes a large-scale selling and promotion effort. 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.

The marketing concept 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. 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 holds that marketing 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 environmentally 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. companies should balance three considerations in setting
their marketing strategies: company profits, consumer wants, and society’s interests.

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). The firm must blend each marketing mix tool into a
comprehensive integrated marketing program that communicates and delivers the intended value
to chosen customers.

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 aspects of acquiring, keeping, and growing customers.

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. Importantly,
customers often do not judge values and costs “accurately” or “objectively.” They act on
perceived value.

Customer satisfaction depends on the product’s perceived performance relative to a buyer’s

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

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. "Not all customers are worth your marketing
efforts". But what should the company do with unprofitable customers that it already has? If it
can’t turn them into profitable ones, it may even want to dismiss customers that are too
unreasonable or that cost more to serve than they are worth. Such “customer divestment”
practices were once considered an anomaly. But new segmentation approaches and technologies
have made it easier to focus on retaining the right customers and, by extension, showing problem
customers the door.
the new technologies create relationship-building opportunities for marketers, they also create
challenges. They give consumers greater power and control. Today’s consumers have more
information about brands than ever before, and they have a wealth of platforms for airing and
sharing their brand views with other consumers. Thus, the marketing world is now embracing not
only customer relationship management, but also customer-managed relationships. In building
customer relationships, companies can no longer rely on marketing by intrusion. Instead,
marketers must practice marketing by attraction—creating market offerings and messages that
involve consumers rather than interrupt them.

consumer-generated marketing - 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, and other digital forums. However,
harnessing consumer-generated content can be a time-consuming and costly process, and
companies may find it difficult to extract even a little amount of value from all the waste.
marketers have been charged with understanding customers and representing customer needs to
different company departments.

(Partners inside the company) The old thinking was that marketing is done only by marketing,
sales, and customer-support people. rather than letting each department go its own way, firms are
linking all departments in the cause of creating customer value. Rather than assigning only sales
and marketing people to customers, they are forming cross-functional customer teams. Rather
than letting each department go its own way, firms are linking all departments in the cause of
creating customer value.

(Partners outside of the company) Most companies today are networked companies, relying
heavily on partnerships with other firms. Through supply chain management, many companies
today are strengthening their connections with partners all along the supply chain.

Customer lifetime value- The value of the entire stream of purchases that the customer would
make over a lifetime of patronage. Losing a customer means losing more than a single sale.

share of customer - the share they get of the customer’s purchasing in their product categories.
firms can offer greater variety to current customers. Or they can create programs to cross-sell and
up-sell to market more products and services to existing customers.

Customer equity - is the total combined customer lifetime values of all the company’s current
and potential customers. Clearly, the more loyal the firm’s profitable customers, the higher its
customer equity. Customer equity may be a better measure of a firm’s performance than current
sales or market share.

One classification scheme defines four relationship

groups based on potential profitability and projected
loyalty: strangers, butterflies, true friends, and
barnacles. Each group requires a different
relationship management strategy. “strangers” show
low potential profitability and little projected
loyalty. - "Don’t invest anything in them." “Butterflies” are potentially profitable but not loyal.
Short- term profitable customer, should be benefitted from in the moment. “True friends” are
both profitable and loyal. The firm wants to make continuous relationship investments to delight
these customers and nurture, retain, and grow them. “Barnacles” are highly loyal but not very
profitable. 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.