Kotler, Brown, Burton, Deans,

Armstrong

Marketing 8e
Chapter 1
Marketing: Creating superior customer value
Non-text material
Occasionally I will introduce material that comes
from:
other texts
my corporate experience
This material will generally be in deep red
I will try to limit this but there will be
concepts/issues that are not covered by the text
or done so superficially that I will need to
incorporate extra comments
This material WILL be examinable
Chapter objectives
1. Define marketing and the marketing process.
2. Discuss the concepts of needs, wants and
demands and their relevance to customer
value and exchange relationships.
3. Define the elements of a customer-driven
marketing strategy and express the basic
ideas of demand management.
Chapter objectives
4. Outline the purpose of an integrated
marketing plan and program, and of building
profitable customer relationships.
5. Explore changes in the marketing landscape,
including the digital age and social media,
rapid globalisation, the call for more ethical
behaviour and social responsibility, the
growth of not-for-profit marketing, the
changing world economy, and sustainability
and green marketing.
Marketing defined
Marketing is a social and managerial process
by which individuals and organisations obtain
what they need and want through creating and
exchanging value with others (Kotler, Brown,
Burton, Deans Armstrong).
Marketing is the activity, set of institutions,
and processes for creating, communicating,
delivering, and exchanging offerings that have
value for customers, clients, partners, and
society at large (American Marketing
Association, 2007).

The marketing process
Understanding the marketplace and customer
needs
Needs: States of felt deprivation
Example: Physical (food, safety, clothing, shelter); social (belonging
and affection); individual (knowledge and self-expression).
Wants: The form taken by human needs as they are shaped by
culture and individual personality
Example: A hungry person in Australia might want a hamburger, chips
and a cola but a hungry person in the South Pacific might want
mangoes, coconuts and beans.
Demands: Human wants that are backed by buying power
Consumers view products as bundles of benefits and choose products
that give them the best bundle for their money.
Market offeringsgoods, services and
experiences
People satisfy their needs and wants through a
market offering, which means a combination
of goods, services, information and
experiences.
A market offering may include services,
activities or benefits that are intangible.
The importance of a market offering lies not so
much in the good or service itself as the
benefits it provides.
Features v benefits
Customer value and satisfaction
Customer value:
The difference between the values the customer
gains from owning and using a product and the
costs of obtaining the product.
Customers often do not judge the offer values
and costs accurately or objectively. They act
on perceived value.
Delivering customer value profitably
Customer delivered value is the difference
between the prospective customers
evaluation of all benefits and the costs of an
offering compared with the perceived
alternatives.
Total customer benefit is the bundle of
economic, functional and psychological
benefits customers expect from the offering.
Total customer cost is the bundle of costs
customers expect to incur in evaluating,
obtaining, using and disposing of the offering.
Implications of customer value
Buyers are not always logical in their decision
making; sometimes, they give more weight to
personal benefits than economic costs and
benefits.

Customer satisfaction
Customer satisfaction is the extent to which a
products perceived performance matches a
buyers expectations.
Firms should:
Identify expectations
Rank them in terms of importance
Ascertain where it sits vis--vis competitors on
each expectation
Q1: Marketing is _____.
A. advertising and selling
B. only used by large firms
C. about satisfying customer needs
D. about making a profit quickly

Ans: about satisfying customer needs
Exchanges and relationships
Exchange is the underlying theory of
marketing and explains why we need to work
in order to get the things we want.
Exchangethe act of obtaining a desired
object from someone by offering something in
return.
Example:
A hungry person might offer money in exchange
for food.
Markets
Markets
A market is the set of all actual and potential
buyers of a product. They share a particular need
or want that can be satisfied through exchange
This represents the overall potential market.
The actual size of a market depends on the
number of people who exhibit the need, have
resources and authority to engage in exchange and
are willing to offer their resources for what they
want.

Marketing
The concept of markets leads back to the
definition of marketing given earlier:
Marketing is the activity, set of institutions, and
processes for creating, communicating, delivering,
and exchanging offerings that have value for
customers, clients, partners, and society at large
(American Marketing Association, 2007).

Figure 1.2 Elements of a modern marketing
system
Designing a marketing strategy
Marketing management is the art and
science of choosing target markets and
building profitable relationships with them.
The marketing manager must find, attract,
keep and grow target customers by creating,
delivering and communicating superior
customer value.
Two important questions must be
answered:
1. What customers will we servewhats our target market?
2. How can we serve these customers bestwhats our value
proposition?


Selecting customers to serve
The company must decide who it will serve by
dividing the market into segments of
customers and selecting which it will target.
By default a firm is also deciding who it doesnt
want to serve (Just say no article)
When possible the key segmentation variable
should be some financial measure:
Customer profitability
Customer lifetime value
Demand management
Demand for products may fluctuate, so
management needs to find ways to deal with
different demand levels. This may mean
changing or reducing demand.
Demarketing reduces demand temporarily or
permanently
Water consumption
Demarketing has expanded definitionsee Just
say no article
Managing demand (1)
Negative demand means that a major part of
the market dislikes the product and may even
pay a price to avoid itgrudge purchase such
as health insurance.
No demand may occur if target consumers are
unaware of a need or they cannot articulate
itnew farming methods.
Latent demand is when needs cannot be
satisfied by any existing productsafer
neighbourhoods.
Managing demand (2)
Declining demand happens to all organisations
and may be due to competitors offerings
churches.
Irregular demand may be due to seasonal,
daily or even hourly variations causing either
idle or overworked capacitylawn mowing.
Managing demand (3)
Full demand means that the company is
satisfied with their volume of business and are
operating at close to current capacity.
Overfull demand means that the demand is
more than the company can handleuse of
national parks (demarketing).
Unwholesome demand refers to demand for
undesirable products or behaviours
cigarettes & alcohol.
Choosing a value proposition
The company must decide how to serve target
customers. This involves differentiating and
positioning itself in the marketplace. This
translates into the differential value that is the
firms value proposition.
The value proposition differentiates one brand
from another.
Example of a value proposition
Customer
Segment
Account
Mgt Product Mgt Fee Reports Entertainment
A Mgr Negoitate Negoitate Customised $3,000 pa
monthly
B Mgr Negoitate Negoitate Customised $1,000 pa
monthly
1800 Std Std Std $0 pa
Quarterly
C 1800 Std Std Std $0 pa
Quarterly
Q2: Customers judge product values and
costs_____.
A. accurately
B. objectively
C. by past experience
D. by perceived value

Ans: by perceived value
Preparing an integrated marketing plan and
marketing mix
The marketing plan summarises the market
situation, defines the marketing strategy
including target markets and value
proposition, lays out the detailed marketing
program and the resources to implement the
strategycontrol/metrics.
The marketing program builds customer
relationships by transforming the marketing
strategy into action.
The marketing mix comprises the four Ps (4Ps)
of marketing: product, price, place and
promotion.
Building profitable customer relationships
The steps of understanding the marketplace,
designing a marketing strategy, and
constructing marketing programs that use the
marketing mix lead to building profitable
customer relationships.
Well see in the segmentation section that not
all customers are worth having a relationship
withthe right customersee next slide
Capturing value from customers
Value creation and relationship building leads to loyal
customers who buy and continue to buy the companys
brands.
This leads to greater profits in the longer term.
Perhaps a more salient definition of marketing is that for
value-based marketingthe process that seeks to
maximise returns to shareholders by developing
relationships with valued customers and creating a
differential advantageDoyle (2008)
Q3: Managing demand is about _____.
A. managing sales
B. managing customers
C. attracting new customers
D. retaining existing customers

Ans: managing customers
The marketing landscape
Information technology and electronic
marketing.
Rapid globalisation.
The changing world economy.
The call for ethical behaviour and social
responsibility.
Marketing accountability.
Growth of not-for-profit marketing.

The marketing landscape
Implementation of a stronger market
orientation.
Sustainability and going green. The rules of
green marketing:
1.Know your customer
2.Empower consumers
3.Be transparent
4.Reassure the buyer
5.Consider your pricing
Companies must avoid green washing
which is the act of misleading consumers
regarding environmental practices or the
environmental benefits of the offer.
Summary
Marketing is a social and managerial process
by which individuals and organisations obtain
what they need and want through creating
and exchanging value with others.
The four steps of the marketing process focus
on creating value for customers, designing a
marketing strategy, constructing an integrated
marketing plan and designing promotion
programs that communicate the value
proposition to target consumers.
Summary
In the face of todays changing marketing
landscape, companies must take into account
three additional factors:
Marketing technology
Global opportunities, and
Ethical and social responsibility.
Do you agree?
Marketing is THE most important business
philosophy because


Everyone is in marketingdirectly or indirectly
Everyone has the responsibility to acquire,
retain and build relationships with the right
customers

NO CUSTOMERS = NO BUSINESS
Class exercise
Form groups of 5/6 students
Read the Office Depot case
Generate answers for the questions on the 2
nd

sheet
Present to class
Debate and discuss