Marketing: An Introduction

MARKETING
INTRODUCTION TO
 Learning Objectives
Marketing: An Introduction

After studying this chapter, you should be able to:

1. Define marketing and outline the steps in the marketing
process
2. Explain the importance of understanding customers and
the marketplace, and identify the five core marketplace
concepts
3. Identify the key elements of a customer-driven marketing
strategy and discuss the marketing management
orientations that guide marketing strategy
4. Discuss customer relationship management, and identify
strategies for creating value for customers and capturing
value from customers in return
5. Describe the major trends and forces that are changing the
marketing landscape in this age of relationships
 Chapter Outline
Marketing: An Introduction

1. What Is Marketing?
2. Understanding the Marketplace and Customer Needs
3. Designing a Customer-Driven Marketing Strategy
4. Preparing an Integrated Marketing Plan and Program
5. Building Customer Relationships
6. Capturing Value from Customers
7. The New Marketing Landscape
8. So, What Is Marketing? Pulling It All Together
Marketing: An Introduction
Do you know??
Marketing: An Introduction

Marketing is managing profitable customer relationships.

Wal-Mart Save Money. Live better.
Apple Think different.
Big bazaar Isse sasta aur aacha kahin nahi.
Telling & Selling
Satisfying customer need.
The aim of marketing is to make selling unnecessary.
 What is marketing?
Marketing: An Introduction

• Selling?
• Advertising?
• Art?
• Science?
 What is a market?
Marketing: An Introduction

“A market consists of all the potential

customers sharing a particular need or
want who might be willing and able to
engage in exchange to satisfy that need
or want” (Philip Kotler).

For instance…..
 Marketing defined
Marketing: An Introduction

Marketing is...the process of planning and

executing the conception, pricing,
promotion, and distribution of ideas,
goods, services, organizations, and
events to create exchanges that will
satisfy individual and organizational
objectives. (AMA 1985)
 Marketing Defined
Marketing: An Introduction

• Marketing is a process… that is…

• Managerial
• Social
• Individual
• Wants, Desires
• Demands – Products and/or Services
Marketing: An Introduction
What Is Marketing?
Marketing Defined

Marketing is the process by which

companies create value for
customers and build strong
customer relationships to capture
value from customers in return.

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 Marketing Management
• What is marketing management?
Marketing: An Introduction

« Marketing management is the process of planning and

executing the conception, pricing, promotion, and
distribution of ideas, goods, and services to create
exchanges that satisfy individual and organizational goals »
(Philip Kotler)

• Marketing management has the task of influencing the level,

timing, and composition of demand in a way that will help the
organization achieve its objectives.

MARKETERS CREATE NEED.

OR
MARKETERS DO NOT CREATE NEEDS. NEEDS PREEXIST
MARKETERS.
 Marketing Management Philosophies
Agree or Disagree?
Marketing: An Introduction

1. Production: consumers will favor products that are

available and highly affordable
2. Product: consumers favor products that offer the
most in quality, performance, and innovative features
3. Selling: consumers will not buy unless an
organization undertakes a large-scale selling and
promotional effort
4. Marketing: determining the needs and wants of
target markets and delivering the desired satisfactions
more effectively and efficiently then the competitors
5. Societal marketing: generating customer
satisfaction and long-run societal well-being are the
keys to both achieving the company’s goals and
fulfilling its responsibilities
Marketing: An Introduction

• Marketing creates utility through the

exchange process
– Utility: Want-satisfying power of a good or
service
• Form utility
• Time utility
• Place utility
• Ownership utility

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 Four Types of Utility
Marketing: An Introduction

Organization
al Function
Responsible
Type Description Examples
Form Conversion of raw J.P. Morgan Chase checking Production
materials and account; Lincoln Navigator;
components into Ramen Noodles (nutrition for
finished goods and students who are hungry, broke,
services and can’t—or won’t—cook)

Time Availability of goods Digital photographs; LensCrafters Marketing

and services when eyeglass guarantee; UPS Next Day
consumers want them Air

Place Availability of goods Soft-drink machines outside gas Marketing

and services at stations; on-site day care; banks in
convenient locations grocery stores

Owner-ship Ability to transfer title Retail sales (in exchange for Marketing
to goods or services currency or credit-card payment)
from marketer to
buyer

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Marketing: An Introduction
What Is Marketing?
The Marketing Process
• Understand the marketplace and customer
wants and needs
• Design a customer-driven marketing strategy
• Construct a marketing plan that delivers
superior value
• Build profitable relationships and create
customer satisfaction
• Capture value from customers to create profit
and customer equity

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Marketing: An Introduction Marketing Process
Understand the
Create customer driven
marketplace and
marketing strategy
customers’ needs/wants

Build profitable relationships Construct a marketing

& create customer delight program that delivers
superior value

Capture value from

customers to create profits
& customer quality

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 Understanding the Marketplace
Marketing: An Introduction
and Customer Needs
Customer Needs, Wants, and Demands
Needs are states of deprivation:
• Physical—food, clothing, warmth, safety
• Social—belonging and affection
• Individual—knowledge and self-expression

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 Understanding the Marketplace
Marketing: An Introduction

and Customer Needs

Customer Needs, Wants, and Demands

• Wants are the form that needs take as they are

shaped by culture and individual personality.
• Demands are wants backed by
buying power.

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 Understanding the Marketplace
Marketing: An Introduction

and Customer Needs

Market Offerings—Products, Services, and
Experiences

• Market offerings are some combination of

products, services, information, or experiences
offered to a market to satisfy a need or want.
• Marketing myopia is focusing only on existing
wants and losing sight of underlying consumer
needs.

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 Understanding the Marketplace
Marketing: An Introduction

and Customer Needs

Customer Value and Satisfaction
Satisfaction is derived from comparing performance
with expectations
Expectations
• Customers make choices according to
• Values and satisfaction of various market offerings
• Marketers
• Set the right level of expectations
• Not too high or too low
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 As far as Customers are concerned there are
three elements to address
Marketing: An Introduction

• Customer value: Difference between

the values that the customer gains from
owning and using a product versus the
costs of obtaining the product.

• Customer satisfaction: The extent to

which a product’s perceived performance in
delivering value matches a buyer’s
expectations.

• Quality: the characteristics of a product or

service that bear on its ability to satisfy
stated or implied customer needs.
 Understanding the Marketplace
Marketing: An Introduction

and Customer Needs

Exchanges and Relationships

• Exchange is the act of obtaining a desired

object from someone by offering something in
return.
• Marketing consists of actions to build and
maintain desirable exchange relationships.

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 Understanding the Marketplace
Marketing: An Introduction

and Customer Needs

• Markets are the set of actual and potential buyers
of a product.
• Marketing system consists of all of the actors
(suppliers, company, competitors, intermediaries,
and end users) in the system who are affected by
major environmental forces: Demographic; Economic;
Physical; Technological; Political-legal; Socio-cultural

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Marketing: An Introduction

Elements of a Modern Marketing System

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 Pulling it All Together
Marketing: An Introduction

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 The marketing concept
Marketing: An Introduction

• “We need to understand consumers needs

and wants in order to decide what to
produce.”

• Focus externally: on the market

• Company wide orientation

 Marketing Management Practice
Essentially Two Types
Marketing: An Introduction

• Entrepreneurial marketing:
– Businesses started by individuals
– Creativity, drive, and perseverance are
keys to success

• Formulated marketing:
– Professional, disciplined approach
– Achieving a market orientation
Marketing: An Introduction
• One-to-One Marketing
– Customized marketing program designed
to build long-term relationships with
individual customers.
– Identifying a firm’s best customers and
increasing their loyalty.
• Developing Partnerships and
Strategic Alliances
– Strategic Alliances: partnerships
between organizations that create
competitive advantages

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 Marketing Concept versus
Selling Concept
Marketing: An Introduction

Starting Point Focus Means Ends

The Marketing Concept

Customer Integrated Profits from
Market
needs marketing satisfied customers

The Selling Concept

Sell and Profits through

Factory Product
Promote it sales volume

Figure 1.3
 Relationships
Marketing: An Introduction

• Relationship marketing: the process of creating,

maintaining, and enhancing strong, value-laden relationships
with customers and other stakeholders.
Marketing: An Introduction
From Transaction-Based
Marketing to Relationship
Marketing

• Transaction–based
marketing (Simple
exchanges)
• Relationship marketing
– Lifetime value of a customer
– Converting new customers to
advocates

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 Four Eras in the History of Marketing
Marketing: An Introduction

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 Designing a Customer-Driven Marketing
Marketing: An Introduction

Strategy
Marketing Management Orientations

• Production concept
• Product concept
• Selling concept
• Marketing concept
• Societal concept

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Marketing: An Introduction

• Production Era
– Prior to 1920s
– Production orientation
– Business success often defined solely in terms of
production victories

• Sales Era
– Prior to 1950s
– Customers resist nonessential goods and services
– Personal selling and advertising’s task is to
convince them to buy

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 Designing a Customer-Driven Marketing
Marketing: An Introduction

Strategy
Marketing Management Orientations

The production concept is the idea that

consumers will favor products that
are available or highly affordable.

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 Designing a Customer-Driven Marketing
Marketing: An Introduction

Strategy
Marketing Management Orientations

Product concept is the idea that consumers will

favor products that offer the most quality,
performance, and features for which the
organization should therefore devote its energy
to making continuous improvements.

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 Designing a Customer-Driven Marketing
Marketing: An Introduction

Strategy
Marketing Management Orientations

Selling concept is the idea that consumers will not

buy enough of the firm’s products unless it
undertakes a large scale selling and promotion
effort.

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 Designing a Customer-Driven Marketing
Marketing: An Introduction

Strategy
Marketing Management Orientations

Marketing concept is the idea that achieving

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

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Marketing: An Introduction

• Marketing Era
– Since 1950s Marketing Concept Emerges
– Satisfying customer needs

• Emergence of the Marketing Concept

– Shift from seller’s to buyer’s market
– Company–wide consumer orientation
– Objective of achieving long–run success

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Marketing: An Introduction
The marketing relationship
era/concept
• Movement away from the single
transaction as cornerstone of marketing
• A focus on building long term relationships
with customers
• Why?
– cost of getting a new customer
– cost of keeping an old customer
• Activities that build long term relationships
 • Relationship Era
Marketing: An Introduction

(Societal Marketing Concept)

– Began in 1990s
– Carried customer orientation even further
– Focuses on establishing and maintaining
relationships with both customers and
suppliers
– Involves long–term, value–added relationships.
– Emphasize on Society, Consumers and
Company.

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 Designing a Customer-Driven Marketing
Marketing: An Introduction

Strategy
Marketing Management Orientations

Societal marketing concept is the idea that a

company should make good marketing decisions
by considering consumers’ wants, the company’s
requirements, consumers’ long-term interests,
and society’s long-run interests.

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 Common marketing problems
Marketing: An Introduction

• How can we identify and choose profitable

market segments?
• How can differentiate our offer from our
competition?
• How should we react to competitors?
• How can we satisfy our customers and
build brand loyalty?
• How can we measure the effectiveness of
an add campaign, of Public Relations, of a
promotion, etc…?
Marketing: An Introduction
What besides goods can we
market?
• People
• Places
• Causes
• Events
• Organizations
– profit
– nonprofit
Marketing: An Introduction
Nontraditional Marketing
• Person Marketing

• Place Marketing

• Cause Marketing

• Event Marketing

• Organization Marketing
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 • Person Marketing
Marketing: An Introduction

– Efforts to cultivate the attention, interest, and

preferences of a target market toward a
celebrity or authority figure
• Place Marketing
– Attempt to attract people and organizations to a
particular geographic area.
• Cause Marketing
– Identification and marketing of a social issue,
cause, or idea to selected target markets

46
Marketing: An Introduction

• Event Marketing
– The marketing of sporting, cultural, and
charitable activities to selected target markets

• Organization Marketing
– Involves attempts to influence others to
accept the goals of, receive the services of,
or contribute in some way to an organization.

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Marketing: An Introduction
 What do marketers do?
Marketing: An Introduction

• Identify needs and wants

• Choose which/whose needs to focus on
• Create and manage products
• Communicate about products
• Price products
• Distribute products
• Follow up
 1. Understanding the market place and Customer
Needs
Marketing: An Introduction

1. Needs, Wants & Demand.

2. Market Offerings (products, services &
experiences)
3. Value & satisfaction
4. Exchanges and relationships.
5. Markets.

50
Marketing: An Introduction

Five Types of needs

1. Stated Needs
2. Real Needs
3. Unstated Needs
4. Delight Needs
5. Secret Needs

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 Avoiding Marketing Myopia
Marketing: An Introduction

• Marketing Myopia is management’s failure to

recognize the scope of its business.
– To avoid marketing myopia, companies must
broadly define organizational goals toward
consumer needs
– Focus on benefits

52
 Major Environmental
Forces in Market.
Marketing: An Introduction

Company

Supplier Marketing Consumers

Intermediaries

Competitors

53
 2. Designing a Customer-driven marketing strategy
Marketing: An Introduction

1. Selecting customers to serve.

2. Choosing a value proposition.

3. Marketing Management Orientation.

54
Marketing: An Introduction Holistic marketing Concept

Integrated Marketing Internal Marketing

Holistic marketing
Concept

Relationship Marketing Social Responsibility

Marketing

55
Marketing: An Introduction
Marketing: An Introduction Preparing an Integrated Marketing plan and
program

• Marketing Mix
• Integrated Marketing program

Build profitable relationships and create

customer delight

57
Marketing: An Introduction Preparing an Integrated Marketing
Plan and Program
Marketing Mix
The marketing mix is the set of tools (four Ps) the firm
uses to implement its marketing strategy:
• Product – create a need-satisfying market offering
• Price – decide how much it will charge for the offer
• Promotion – communicate with target customers
about the offer and persuade them of its merits
• Place – decide how it will make the offer available
to target consumers

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Marketing: An Introduction MARKETING MIX
Target Market

Product Price Promotion Place

Variety List price Sales promotion Channels
Quality Discounts Advertising Coverage
Design Allowances Sales force Assortmen
Features Payment PR Location
Brand name Period DM Inventory
Packaging Credit Transpor
Sizes, Services Term
Warranties

59
Marketing: An Introduction
SELLER BUYER
4 P’s 4 C’s
Product Customer Solution
Price Customer Cost
Place Convenience
Promotion Communication

Robert Lauterborn

Business & Markets are changing.

Technology Globalization
Deregulation Privatization
Customer empowerment Customization
Heightened competition Industry convergence
Retail Transformation Disintermediation

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 Preparing an Integrated Marketing Plan
Marketing: An Introduction

and Program
Integrated Marketing Program

An integrated marketing program is a

comprehensive plan that communicates and
delivers the intended value to chosen customers.

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 Building Customer Relationships
Marketing: An Introduction

Customer Relationship Management (CRM)

Customer relationship management is the overall

process of building and maintaining profitable
customer relationships by delivering superior
value and satisfaction.

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Marketing: An Introduction Building Customer Relationships

Customer Value

• Customer Value is a set of benefits that are

reckoned by the customers.
• Customer-Perceived value.
• Customer Satisfaction.
• Customer Relationship Tools.
• Customer Relationship Levels.

63
Marketing: An Introduction Designing a Customer-Driven
Marketing Strategy
Marketing Management

• Marketing management is the art and science of

choosing target markets and building profitable
relationships with them.
• What customers will we serve?
• How can we best serve these customers?

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 Designing a Customer-Driven Marketing
Marketing: An Introduction

Strategy
Selecting Customers to Serve

• Market segmentation: Dividing the

markets into segments of customers
• Target marketing: Which
segments to go after

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 Designing a Customer-Driven Marketing
Marketing: An Introduction

Strategy
Selecting Customers to Serve

• De-marketing
• Marketing to reduce demand temporarily or
permanently
• The aim is not to destroy demand but to reduce or shift
it.

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 Designing a Customer-Driven Marketing
Marketing: An Introduction

Strategy
Selecting Customers to Serve

Marketing management is:

• Customer management
• Demand management

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 Designing a Customer-Driven Marketing
Marketing: An Introduction

Strategy
Choosing a Value Proposition

The value proposition is the set of benefits or

values a company promises to deliver to
customers to satisfy their needs.

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 Customer Driven vs. Customer
Marketing: An Introduction

Driving Marketing

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 Building Customer Relationships
Marketing: An Introduction

Customer Relationship Management (CRM)

Customer perceived value is the difference between

total customer value and total customer cost of a
market offering relative to those of competing
offers.

Customer satisfaction is the extent to which a

product’s perceived performance matches a
buyer’s expectations.

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 A Customer’s Perception of Value
Marketing: An Introduction

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 Building Customer Relationships
Marketing: An Introduction

Customer Relationship Management (CRM)

Customer Relationship Levels and Tools

• Basic relationship (with low-margin customers)
• Full relationships (with high-margin/key customers)
Developing strong bonds with customers through
• Frequency marketing programs
• Club marketing programs

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 Building Customer Relationships
Marketing: An Introduction

The Changing Nature of Customer Relationships

 Relating with more carefully selected customers uses
selective relationship management to target fewer,
more profitable customers.
 Relating for the long term uses customer relationship
management to retain current customers and build
profitable, long-term relationships.
 Relating directly uses direct marketing tools (telephone,
mail order, kiosks, Internet) to make direct connections
with customers.

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 Building Customer Relationships
Marketing: An Introduction

Partner Relationship Management

Partner relationship management refers to working

closely with partners in other company
departments and outside the company to jointly
bring greater value to customers.

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 Building Customer Relationships
Marketing: An Introduction

Partner Relationship Management

• Partners inside the company is every function area

interacting with customers.
• Electronically
• Cross-functional teams

• Partners outside the company is how marketers

connect with their suppliers, channel partners, and
competitors by developing partnerships.

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 Building Customer Relationships
Marketing: An Introduction

Partner Relationship Management

• The supply chain is a channel that stretches

from raw materials to components to final
products to final buyers.
• Supply management
• Strategic partners
• Strategic alliances

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 Capturing Value from Customers
Marketing: An Introduction

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.

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 Capturing Value from Customers
Marketing: An Introduction

Growing Share of Customer

Share of customer is the portion of the customer’s

purchasing that a company gets in its product
categories.

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 Capturing Value from Customers
Marketing: An Introduction

Building Customer Equity

Customer equity is the total combined customer

lifetime values of all of the company’s
customers.

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 Capturing Value from Customers
Marketing: An Introduction

Building Customer Equity

Customer Lifetime Value:
Customer Lifetime Value or CLV is
• Buildingpotential
the right relationships
income that a customerwith
can the right
generate for a business during her/his
customerstotalinvolves
relationshiptreating
period. customers as assets
that needIt isto be managed
calculated and value
as the present maximized.
of
the future cash flows or the value of
• Different typesattributed
business of customers require different
to the customer
during his or her entire relationship with
relationship management strategies
the company.
• Build the
Theright
CLV isrelationship
used to design with the right
the marketing
strategy and customer relationship
customers
programs for the company

1-80
Marketing: An Introduction

Potential
Profitability

Projected Loyalty
Marketing: An Introduction The Technology Revolution in Marketing

• Technology: Application to business of

knowledge based on scientific
discoveries, inventions, and innovations

• Interactive marketing refers to buyer-

seller communications in which the
customer controls the amount and type of
information received from a marketer

82
 The New Marketing Landscape
Marketing: An Introduction

Major Developments
Digital age
• Globalization
• Ethics and social responsibility
• Not-for-profit marketing
• The new world of marketing relationships

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 The New Marketing Landscape
Marketing: An Introduction

The New Digital Age

• Recent technology has had a major impact on the ways
marketers connect with and bring value to their
customers
• Market research
• Learning about and tracking customers
• Create new customized products
• Distribution
• Communication
• Video conferencing
• Online data services

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 The New Marketing Landscape
Marketing: An Introduction

The New Digital Age

Internet—creates marketplaces and

Marketspaces
• Information
• Entertainment
• Communication

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Marketing: An Introduction

• The Internet is an all-purpose global network

composed of more than 50,000 different
networks around the globe that allows those
with access to a computer send and receive
images and text anywhere
– The World Wide Web
• Broadband technology is extremely high
speed, always-on Internet connection
• Wireless Internet connections for laptops and
PDA’s
• Interactive Television Service (iTV)

86
 • How Marketers Use the Web
Marketing: An Introduction

– Interactive brochures
– Online newsletters
– Virtual storefronts
– Information clearinghouses
– Customer service tools

87
 The New Marketing Landscape
Marketing: An Introduction

The Call for More Ethics and Social Responsibility

Social marketing campaigns encourage energy

conservation and concern for the environment
or discourage smoking, excessive drinking, and
drug use.

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 Ethics and Social Responsibility: Doing Well by
Doing Good
Marketing: An Introduction

• Increased Employee Loyalty

• Better Public Image

• Market Place Success

• Improved Financial Performance

89
 The New Marketing Landscape
Marketing: An Introduction

Rapid Globalization

• The world is smaller

• Think globally, act locally

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 The New Marketing Landscape
Marketing: An Introduction

The Call for More Ethics and Social Responsibility

Marketers are being called upon to take greater

responsibility for the social and environmental
impact of their actions in a global economy.

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 The New Marketing Landscape
Marketing: An Introduction

The Growth for Not-for-Profit Marketing

• Colleges
• Hospitals
• Museums
• Zoos
• Orchestras
• Religious groups

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Marketing: An Introduction
Costs and Functions of Marketing

93
 Question:
Assume that a customer shops at a local grocery store spending an
Marketing: An Introduction
average of $350 a week, resulting in a retailer profit of $35 each week
from this customer.
Assuming the shopper visits the store all 52 weeks of the year,
calculate the customer lifetime value if this shopper remains loyal over
a 10-year life span.
Also assume a 9 percent annual interest rate and no initial cost to
acquire the customer.
The customer yields $_per year in profits for this retailer. (Round to the
nearest dollar.)
The customer lifetime value is $_

Answer and Explanation:

The Total annual Spending = $350 * 52 = $18,200.00
The Annul Profit = $35*52 = $1,820.00
•So the customer yields = $1,820.00 per year
•Customer lifetime value = PV of all future incomes in terms of net
profit
•Yeild * {1-(1+r)^-t/r or
=$1,820 * {1-(1+r)^-10}/r Where, r = discount rate and n = life span
=$1,820 * {1-(1.09)^-10}/0.09 = $11,680.14
Marketing: An Introduction
Customer Lifetime Value:
Customer Lifetime Value or CLV is potential income that a
customer can generate for a business during her/his total
relationship period.
It is calculated as the present value of the future cash flows or
the value of business attributed to the customer during his or
her entire relationship with the company.
The CLV is used to design the marketing strategy and
customer relationship programs for the company