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Marketing: Creating and

Capturing Customer Value

Rest Stop: Previewing the Concepts

Define marketing and outline the steps in the marketing

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process
Explain the importance of understanding customers and
the marketplace and identify the five core marketplace
concepts
Identify the key elements of a customer-driven marketing
strategy
Discuss customer relationship management and identify
strategies for creating value for customers and capturing
value from customers in return
Describe the major trends and forces that are changing
the marketing landscape in this age of relationships

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What Is Marketing?

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Marketing Old vs. New

Old view of marketing:
Making a sale -- Telling and Selling

New view of marketing:

Satisfying customer needs

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What Is Marketing?
Simple Definition:
Marketing is managing profitable
customer relationships.

How? By accomplishing the following:

1. Attracting NEW customers by promising
superior value.
2. KEEPING and GROWING current
customers by delivering satisfaction.

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Marketing Defined
Marketing is the
process by which
companies create
value for customers
and build strong
customer
relationships in
order to capture
value from

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Marketing is...
A managerial process involving

analysis, planning, implementation and control

Based on formal programs

Focused on bringing about exchanges of value
Aimed at selected target markets

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Marketing is...
Intended to help organizations survive, stay
healthy and flexibleachieve objectives

Focused on matching target market needs

and the product mix = product/market
marriage

Dedicated to integrating the tools of the

marketing mix in the distribution function

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A Simple Model of the Marketing Process

Create value for customers
and build customer
relationships

Understand the
marketplace
and customer
needs and
wants

Design a
customer-driven
marketing
strategy

Construct a
marketing
program
that delivers
superior value
Capture value
from customers
in return

Build profitable
relationships and
create
customer delight

Capture value
from customers to
create profits and
customer equity
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Core Customer and Marketplace

Concepts
Creating value for customers requires that
we first understand the marketplace and
customer needs, including five core
customer and marketplace concepts:
Needs, wants, and demands
Marketing offers (products,
services, and experiences)
Value and satisfaction
Exchanges and relationships
Markets
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Needs, Wants, and Demands

Needs:
A state of felt
deprivation
including
physical,
social, and
individual
needs.
Name some specific examples of each need type.
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Types of Needs
Physical:
Food, clothing, shelter, safety

Social:
Belonging, affection

Individual:
Learning, knowledge, selfexpression

These needs were not

created by marketers; they

are a basic part of the
human makeup.

Is ice cream a
need?
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Needs, Wants, and Demands

Wants:
Form that a
human need
takes, as shaped
by culture and
individual
personality.
Preferences for
brands are wants.
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This Is Demand
Wants

Buying Power

Demand

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Discussion Question
Describe a
college
education in
terms of
wants, needs,
and demands?
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Marketing Offers
Needs and Wants
Fulfilled through a
Marketing Offer :
Some combination of
products, services,
information, or
experiences offered to
a market to satisfy a
need or want.

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Market Offerings
Products:
Persons, places, organizations, information,
ideas.

Services:

Activity or benefit offered for sale that is

essentially intangible and does not result in
ownership.

Brand Experiences:

. . . dazzle their senses, touch their hearts,

stimulate their minds.
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Marketing in Action

More Than Just Products

Market offerings are not
limited to physical
products. LaSalle
Bank runs ads asking
people to donate used
or old winter clothing
to the Salvation Army.
Here, the market
offering is helping the
less fortunate to keep
warm.

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Product as an Idea
Products do not
have to be
physical objects.
Here the
product is an
ideaprotecting
animals.

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Product as an Idea
ReligionChristianity, Judaism,

Hinduism, Buddhism, Islam

PoliticsDemocrat vs. Republican
Birth ControlRight to Life vs.
Free Choice
International Economics
Free Trade vs. Protectionism
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Marketing
Marketing Myopia
Myopia
Sellers pay more attention
to the specific products
they offer than to the
benefits and experiences
produced by the
products.
--Railroads
--Movies
--Petroleum

They focus on the

wants and lose sight of

the needs.
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Marketing in Action

Marketing Myopia in the Recording Industry

Focused on selling prerecorded CDs, the record
industry missed early opportunities to partner with
music downloading services and manufacturers of
digital MP3 type recording devices.
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Value and Satisfaction

Expectatio
n
8

Performance
10

Expectatio
n

Performance

10

- If performance is lower than expectations, satisfaction is low.

- If performance is higher than expectations, satisfaction is high.

Advertising is one of the primary methods by which consumer

expectations are formed

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Exchanges and Relationships

Exchange:

Act of obtaining
a desired object
from someone
by offering
something in
return.

What would be
exchanged for
a vacation?

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Exchanges and Relationships

Relationships:
Marketing actions build and maintain
relationships with target audiences
involving an idea, product, service, or
other object.
Marketers build strong relationships
by consistently delivering superior
customer value.

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What is a Market?
The set of actual

and potential
buyers of a product.

These people share

a need or want that

can be satisfied
through exchange
relationships.

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Elements of a Modern Marketing System

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Marketing Management
The art and science of choosing target
markets and building profitable
relationships with them.

Requires that consumers and the

marketplace be fully understood.
Aim is to find, attract, keep, and grow
customers by creating, delivering, and
communicating superior value.

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Marketing Management
Designing a winning marketing

strategy requires answers to the

following questions:
1. What customers will we serve?
What is our target market?
2. How can we best serve these
customers?
What is our value proposition?
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Segmentation
and Target Marketing
Market Segmentation
Divides the
market for a
product
category into
segments of
consumers.

Target Marketing
Process of selecting one or more segments
to target.
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Dimensions of Market Segmentation

Geographic
Demographic
Psychographic: Attitudes, Interests,
Opinions(AIOs)
Benefit

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The Nine Nations of North America

The Empty Quarter

New England

Ectopia

The Foundry

The Breadbasket

Dixie

Mexamerica

The Islands

Quebec
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Lets Talk!
Pair up with another
student and discuss the
ad shown at right.
Are you part of the
target market for this
product?
List the personal traits,
variables, or factors that
characterize members of
this market segment.
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Demand Management
Demand Management
Finding & increasing demand
Also changing or reducing
demand, such as in
demarketing.

Demarketing
Temporarily or permanently
reducing the number of
customers or shifting their
demand.
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Marketing in Action

Demarketing
Demarketing is often
used to discourage
undesirable behaviors.
Is this ad effective?
Visit the Office of
National Drug Control
Policy ad gallery.

mediacampaign.org
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Value Proposition
The set of benefits

or values a company
promises to deliver
to consumers to
satisfy their needs.

- Value propositions

dictate how firms will

differentiate and
position their brands in
the marketplace.
The Smart car is positioned as
compact, yet comfortable; agile, yet
economical; safe, yet ecological.

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Marketing in Action

Land Rovers Value Proposition

Go Beyond
Land
Rovers ad
invites its
readers
to get a
taste of
adventure,
whatever
your
tastes.
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Marketing Management Philosophies

Five key marketing
management
philosophies:

Production Concept
Product Concept
Selling Concept
Marketing Concept
Customer driven
Societal Marketing
Concept
Customer and society
driven

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Marketing and Sales Concepts Contrasted

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The Societal Marketing

Concept
A companys marketing decisions

should consider consumers wants,

the companys desires, consumers
long-run interests and societys longrun interests

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The Societal Marketing

Concept

Calls for sustainable

marketingsocially
and environmentally
responsible marketing
that meets the
present needs of
consumers while also
preserving the ability
of future generations
to meet their needs

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According to UPS,
social
responsibility isnt
just good for the
planet. Its good for
business.

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The Considerations Underlying the

Societal Marketing Concept

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Evolution of Marketing Over Time

1860-1925--The Production Era
1920-1960s--The Sales Era
1960s-To Date--The Marketing
Era

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The Pillsbury Company: A Case Study

The Pillsbury Company in Transition Pre-1930s: Production Orientation

Our basic function is to mill
high quality flour

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The Pillsbury Company: A Case Study

The Pillsbury Company in Transition

1930--1950s: Sales Orientation
We must have a first-rate sales
organizationto dispose of all the
products we can make at favorable
prices...
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The Pillsbury Company: A Case Study

The Pillsbury Company in Transition

1950 to Date: Marketing Orientation
The criteria to be used in
determining what products to market
are those of the consumer
herself
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The Pillsbury Company: A Case Study

The Pillsbury Company in Transition

in the Future: Marketing Control
Marketing will become the basic
motivating force for the entire
company
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Customer-Driven Marketing
Twenty years ago, how many

consumers would have thought to

ask for laptops, wireless headsets,
cell phones, MP3 players, PDAs,
and digital cameras?

Marketers must often

understand customer needs even

better than customers themselves
do.

The public doesnt know what

is possible, but we do. -Sony

Our goal is to lead customers

where they want to go before they

know where they want to go.
3M
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The Integrated Marketing Plan

Transforms the marketing strategy into
action.
Includes the marketing mix and the
4 Ps of marketing:
Product
Price
Place
Promotion

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Customer Relationship
Management
The overall process of
building and maintaining
profitable customer
relationships by delivering
superior customer value
and satisfaction.
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Building Customer Relationships

Customer Relationship Management

(CRM):
CRM deals with all aspects of
acquiring, keeping, and growing
customers.
Customer value and satisfaction
are key.

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Customer Perceived Value

Customers evaluation of the

difference between all of the
benefits and all of the costs
of a marketing offer relative
to those of competing offers.
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Customer Perceived Value

Customer perceived value:
Perceptions may
be subjective.
Consumers often
do not objectively
judge values and
costs.

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Customer Satisfaction
Customer satisfaction:

High levels of customer

satisfaction often leads to
consumer loyalty.
Some firms seek to
DELIGHT customers by
exceeding expectations.
Profitability must be
considered.

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Customer Relationships
Firms may choose to build relationships at
different levels
Loyalty and retention programs build
relationships and may feature:
Financial Benefits

E.g., frequency marketing programs

Social Benefits

E.g., club marketing programs

Structural Ties

Focus is on relating directly to profitable

customers, for the long term.

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Changing Nature of Relationships

Selective Relationship Management:

Customer profitability analysis eliminates

losing customers and selects profitable ones.

Relating more deeply and interactively via

blogs, social network Web sites, email, and

video sharing.
Marketing by attraction vs. intrusion.

Increased amounts of consumer generated

marketing.

- i.e., Threadless, a young Chicago-based fashion

company
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Customer-Managed Relationships

Marketing relationships in

which customers, empowered

by digital technologies,
interact with companies and
with each other to shape
their relationships with
brands
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Consumer-Generated Marketing
Brand exchanges

created by
consumers by
which consumers
play an increasing
role in shaping
their own brand
experiences and
those of other
consumers

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Harnessing consumer-generated
marketing: H. J. Heinz invited
consumers to submit homemade
ads for its ketchup brand on
YouTube
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Partner Relationship Management

Working closely with others inside

and outside the company to jointly

bring more value to customers
Partners inside the firm:
Cross-functional teams

Partners outside the firm:

Supply chain and channel partners
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Capturing Value from Customers

Superior customer
value results in:

Customer loyalty
and retention
A growing share of
customers
Customer equity

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Customer Loyalty & Retention

Customer
Lifetime Value

Share of
Customer

The entire stream of

purchases that the
customer
would make
over a lifetime
of patronage.

The share a company

gets of
the customers
purchasing in
their product
categories.

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Customer Lifetime Value

To keep customers coming back, Stew Leonards has

created the Disneyland of dairy stores. Rule #1the
customer is always right. Rule #2if the customer is
ever wrong, reread Rule #1.

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Customer Equity
Customer equity

is the total
combined
customer
lifetime values of
all the
companys
customers.
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Customer Relationship Groups

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Customer Relationship Management

Drunkenness -- The employee perceives the customer to be

clearly intoxicated and creating problems such as harassing

other customers nearby, giving the employee a hard time, or
disrupting the atmosphere of the establishment.
Verbal and physical abuse -- The customer verbally and/or
physically abuses either the employee or other customers.
Breaking company policies or laws -- The customer
refuses to comply with policies or laws, and the employee
attempts to enforce compliance.
Uncooperative customers -- The customer is generally rude
and uncooperative or unreasonably demanding. From the
employee's perspective, the customer is unwilling to be
satisfied, no matter what is done for him or her.

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The Changing Marketing Landscape

Economic

uncertainties
Growth in digital
technology
Rapid globalization
Sustainable
marketing
Growth of not-forprofit marketing
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In the current economic

environment, companies must
emphasize the value in their value
propositions, as Target did when it
shifted the balance more toward
the Pay Less half of its Expect
More. Pay Less positioning
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Marketing at Work
The recession from

2008 to 2009
undermined
consumer confidence
The post-recession
era has seen a shift
in spending patterns,
with consumers
becoming more
frugal
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Even as the economy strengthens,

rather than reverting to their old
free-spending ways, Americans are
now showing an enthusiasm for
sensible consumption not seen in
decades

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Figure 1.6 - An Expanded Model of

the Marketing Process

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Rest Stop: Reviewing the Concepts

Define marketing and outline the steps in the

marketing process
Explain the importance of understanding customers
and the marketplace and identify the five core
marketplace concepts
Identify the key elements of a customer-driven
marketing strategy
Discuss customer relationship management and
identify strategies for creating value for customers and
capturing value from customers in return
Describe the major trends and forces that are changing
the marketing landscape in this age of relationships

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