Priciples of Marketing

by Philip Kotler and Gary Armstrong

Chapter 1
Marketing:Creating and Capturing
Customer Value

PEARSON
Objective Outline
What Is Marketing
1 Define marketing and outline the steps in the
marketing process.

Understanding the Marketplace and Customer

Needs
Explain the importance of understanding customers
2
and the marketplace and identify the five core
marketplace concepts.
Objective Outline

Designing a Customer-Driven Marketing

Strategy
Preparing an Integrated Marketing Plan and
3 Program
Identify the key elements of a customer-driven marketing
strategy and discuss the marketing management
orientations that guide marketing strategy.
Objective Outline

Building Customer Relationships

Capturing Value from Customers
4 Discuss customer relationship management and
identify strategies for creating value for customers
and capturing value from customers in return.

The Changing Marketing Landscape

5 Describe the major trends and forces that are
changing the marketing landscape in this age of
relationships.
What Is Marketing?

Simplest
definition

Marketing is Attract new Keep and grow

managing profitable customers by current customers
customer promising superior by delivering
relationships. value satisfaction.
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.

We define marketing as a process by which companies

create value for customers and build strong customer
relationships to capture value from customers in return.
Four Types of Utility
Type Descrition Examples Organizational
Function
Responsible
Form Conversion of raw Dinner at Uncle Tom's; Production
materials and components iPod; jeans from Levis
into finished goods and
services
Time Availability of goods and Physician appointment; Marketing
services when consumes digital
want them photographs;Executive
Optical guarantee
Place Availability of goods and Technicians available at Marketing
services at convenient an auto repair facility;on-
locations site day care; banks in
grocery
Ownershi Ability to transfer title to Retail sales (in exchange Marketing
p(possessi goods or services from for currency, credit, or
on) marketer to buyer debit card payment)
 Marketing Process
This important figure shows marketing in a nutshell. By
creating value for customers, marketers capture value from
customers in return. This five-step process forms the
marketing frame work for the rest of the chapter and the
remainder of the text.

Construct an Build profitable Capture value

Understand the Design integrated relationships from
marketplace customer-driven marketing and create customers to
and customer marketing program that customer create profits
needs and wants strategy delivers delight and customer
superior value equity

Create value for customers and

build customer relationships Capture value from
customers in return
Understanding the Marketplace
and Customer Needs
Customer Needs, Wants, and Demands

Needs States of felt deprivation

• Physical—food, clothing, warmth, safety
Social—belonging and affection
Individual—knowledge and self-expression

Wants
• Form that needs take as they are shaped by culture and
individual personality
Understanding the Marketplace
and Customer Needs
Customer Needs, Wants, and Demands

Deman
ds
• Human wants backed by buying power。
Market Offerings-Products, Wants,
and Demands
 Market offerings are some combination of
products, services, information, or experiences
offered to a market to satisfy a need or a want.

 Marketing myopia is focusing only on existing

wants and losing sight of underlying consumer
needs.
Customer Value and Satisfaction
Expectations
 Customers
• From expectations about the value and satisfaction that
various market offerings
• Will deliver and buy accordingly.

 Marketers
• Set the right level of expectations
• Not too high or low
Exchanges and Relationships

 Exchange
• the act of obtaining a desired object from someone by
offering something in return
 Relationship
• Marketing actions try to create, maintain, grow
exchange relationships.
Markets
• Each party in the system adds value. Walmart cannot fulfill
 its promise of low prices unless its suppliers provide low
Markets are the set of actual and potential
costs. Ford cannot deliver a high-quality car-ownership
buyers of a product.
experience unless its dealers provide outstanding service.
• Arrows represent relationships that must be developed and
managed to create customers value and profitable customer
relationships.
5 Eras in the History of Marketing
Production Era
Sales Era
Marketing Era
Relationship Era
Social Era
 Production Era
Manufacturers stressed
production of quality
products and then looked
for people to purchase
them.
High-quality product would
sell itself.
This is an example of the mass
production of aircraft.
 Sales Era
• began at the end of
the production era
due to the fact that
people were
becoming more
connected and would
no longer just buy
products blindly and This is an ad for the not-so-popular
mystery meat "Spam".
lasted roughly twenty
years.
• It was all about price,
not quality, but price.
Marketing Era
• which Kotler says started
around the mid-1950s, saw a
fundamental shift. Instead of
just trying to persuade
consumers to buy the
products they were making,
companies focused on
making products that
customers wanted to buy.
• This stage is all about
focusing on the needs of the
customer, and it also helped
many people get jobs.
Relationship Era
• This era began in the
1990's and is still is in use
today. Apple is the leading company in relationships
with customers.
• This is all about building
a long-term mutually
beneficial relationship
with the customer.
Ford is a major player in the field of vehicles and
• The mindset is all about is also very effective at building relationships

building the customer's

trust and making sure
that they will buy the
product that you offer.
Social Era
Designing a Customer-Driven
Marketing Strategy
 We define marketing management is the art and
science of choosing target markets and building
profitable relationships with them.

What
Twocustomers
important questions:
will we serve
(what’s our target market)? Ch2

How can we serve these

customers best (what’s our Ch7
value proposition)?
Selecting Customers to Serve

 Market segmentation refers to dividing the

markets into segments of customers.
 Target marketing refers to which segments to go
after.
Choosing a Value Proposition

 A brand’s value proposition is the set of benefits

or values it promises to deliver to consumers to
satisfy their needs.
Marketing Management
Orientations
The The
The The The
Product Marketi
Product Selling Societal
ion ng Marketing
Concep Concep
Concep Concep Concept
t t
t t

The Product
The Societal Concept
Marketing Concept
The
The product The Selling
Marketing
Production
concept Concept
Concept
Concept
holds that consumers will
The societal marketing concept holds that
The selling
favormarketingconcept
production
products conceptholdsthe
concept
that offer that
depends
holds consumers
most on
that knowingwillthe
consumers
quality, not
will
marketing strategy should deliver value to customers
buy
needs
favorenough
products
performance, ofand
and wants the
that firm’s
offeatures.
are products
the available
target isunless
markets
Focus and and itdelivering
highly
on continuous
in a way that maintains or improves both the
undertakes
the desired
affordable.
product asatisfactions
large scale selling
improvements. and competitors
better than promotion effort
do.
consumer’s and society’s well-being.
Marketing Management
Orientations
• The selling concept takes an inside-out view that focuses on
existing products and heavy selling. The aim is to sell what the
company makes rather than making what the customer wants.
• The marketing concept takes an outside-in view that focuses on
satisfying customer needs as a path to profits. As South-west
Airlines’ colorful founder puts it, “We don’t have a marketing
department, we have a customer department.”
Preparing an Integrated
Marketing Plan and Program
 The marketing mix is the set of tools (four Ps) the
firm uses to implement its marketing strategy. It
includes product, price, promotion, and place.

 The firm must blend each marketing mix tool

into a comprehensive integrated marketing
program that communicates and delivers the
intended value to chosen customers.
Building Customer Relationships
Customer Relationship Management (CRM)

 In this broader sense, customer relationship

management is the overall process of building
and maintaining profitable customer relationships
by delivering superior customer value and
satisfaction.
Relationship Building Blocks:
Customer Value and Satisfaction
 A customer buys from the firm that offers the
highest 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.
 Customer satisfaction depends on the product’s
perceived performance relative to a buyer’s
expectations. If the product’s performance falls
short of expectations, the customer is dissatisfied.
Customer Relationship Levels and
Tools
 Companies can build customer relationships at
many levels, depending on the nature of the
target market.
 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.
The Changing Nature of Customer
Relationships
 Today’s companies are building deeper, more
direct, and lasting relationships with more
carefully selected customers.
Relating with More Carefully
Selected Customers
 Today, most marketers realize that they don’t
want relationships with every customers. Instead,
they target fewer, more profitable customers.
Relating More Deeply and
Interactively
 Relating more deeply and interactively by incorporating
more interactive two way relationships through blogs,
Websites, online communities and social networks
 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.
 A growing part of the new customer dialogue is
consumer-generated marketing, by which consumers
themselves are playing a bigger role in shaping their own
brand experiences and those of others.
Partner relationship management

 In addition to being good at customer relationship

management, marketers must also be good at
partner relationship management—working
closely with others inside and outside the
company to jointly bring more value to customers.
Partner relationship management

 In today’s more connected world, every

functional area in the organization can interact
with customers. The new thinking is that—no
matter what your job is in a company—you must
understand marketing and be customer focused.
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.
Creating Customer Loyalty and
Retention
 Customer lifetime value is the value of the
entire stream of purchases that the customer
would make over a lifetime of patronage
Growing Share of Customer

 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 Customer Equity

 Customer equity is the total combined customer

lifetime values of all of the company’s current
and potential customers.
The Changing Marketing Landscape

 This section have five major developments:

The Changing
Marketing The Digital Age
Landscape

The Growth of Not-

Rapid Globalization
for-Profit Marketing

Sustainable Marketing
─ The Call for More
Social Responsibility
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 and slash
prices in an effort to coax more frugal customers into
opening their wallets.
 The challenge is to balance the brand’s value proposition
with the current times while also enhancing its long-term
equity.
The Digital Age
 The digital age has provided marketers with exciting new
ways to learn about and track customers and create
products and services tailored to individual customer
needs.
 Online marketing is now the fastest-growing form of
marketing.
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, symphony
orchestras, and even churches.
 Government agencies have also shown an increased
interest in marketing.
Rapid Globalization
 Today, almost every company, large or small, is touched
in some way by global competition.
 Managers in countries around the world are increasingly
taking a global, not just local, view of the company’s
industry, competitors, and opportunities.
Sustainable Marketing ─ The Call for
More Social Responsibility
 As the worldwide consumerism and environmentalism
movements mature, today’s marketers are being called on
to develop sustainable marketing practices.
 Corporate ethics and social responsibility have become
hot topics for almost every business.
The End