A company that’s customer focused and committed to marketing=successful company
Understand and satisfy customer needs in well-defined target markets.
Build lasting customer relationships based on value creation
Especially important due to frugal consumers
What is Marketing?
-managing profitable customer relationships; attract new customers with superior value and keep and
grow current customers with satisfaction. [Critical for success]
Recently marketers use new approaches: websites, social networks, mailbox, etc.
-more than just mass messaging; targeting directly and personally to ‘live’ their brands.
Marketing Defined: process by which companies create value for customers and build strong
customer relationships in order to capture value from customers in return.
-needs to go past just ‘telling and selling’ and go to satisfying customer needs.
-easy sell: understand needs, develop products that provide superior value and prices, and distribute
and promote effectively. Goal is to make selling unnecessary.
-social and managerial process used to obtain what organizations need and want through creating and
exchanging value with others—build profitable, value-laden exchange relationships with customers.
The Marketing Process: 5 step model
-Step 1-4: work to understand consumers, create customer value, and build strong customer
-Step 5: reap rewards of creating a superior customer valuethe value created captures value from
consumers through sales, profits and long-term equity
Understanding the Marketplace and Customer Needs
-There are 5 core customer and marketplace concepts.
1) Customer Needs, Wants, And Demands: Human needs are states of felt deprivation—physical,
social and individual (knowledge and self-expression). Wants are needs shaped by culture,
individual personality and marketing programs (need breakfast and want a specific breakfast
sandwich). Demand is formed by wants backed by buying power.
-conduct consumer research and analyze customer data.
2) Market Offerings—Product, Services and Experiences: needs and wants are fulfilled through
market offerings, not limited to physical products—services, entities like persons, places,
organizations, information and ideas.
-some sellers make mistake to pay attention to specific products offered rather than the benefits and experiences produced by these products. [marketing myopia]
-don’t forget that a product is only a tool to solve a consumer problem (manufacturer sell the
drill bit thinking consumer needs a drill bit, but the consumer needs to make a whole)
-create brand experience for consumers
3) Customer Value and Satisfaction: customers form expectations about value and satisfaction
markets offer and make their decisions on what to buy based on it. Satisfaction=repeat
purchase. Dissatisfaction=diversion to competitors and disparage products to others.
-set reasonable level of expectations.
4) Exchange and Relationships: marketing=when people satisfy needs and wants through exchange
-Exchange: obtaining desired object from someone by offering something in return.
-marketers try to bring a response to market offering and response may be buying or trading.
-marketing=actions taken to build and maintain desirable exchange relationships with target
5) Marketing: exchange and relationships lead to the concept of a market (set of all actual and
potential buyers of a product). The goal is to bring profitable customer relationships.
-core marketing activities: consumer research, product development, communication,
distribution, pricing, and service.
-marketing is not done by only sellers; buyers do marketing when they search for products and
interact with companies and obtain information and make purchases.
-marketer’s must deal effectively with customer-managed relationships.
Elements in a marketing system: involves serving a market of final consumer against competitors.
Company and competitors research market, create and send their market offerings and messags to
consumers directly or through marketing intermediaries. [parties are affected by major environmental
forces, i.e. demographic, economic, physical, technological, etc]
Designing a Customer-Driven Marketing Strategy
-after understanding environment, marketing management can design a customer-driven marketing
-marketing management: art and science of choosing target markets and building profitable
relationships with them
-target is to find, attract, keep and grow target customers by creating superior customer value.
Selecting Customers to Serve: first decide who it will serve—dividing the market; market segmentation
and target marketing.
-serving all customers may lead to not serving well; serve selected customers to do it well and
-must decide target market, and on the level, timing and nature of their demand.
-marketing management=customer management + demand management.
Choosing a Value Proposition: second is to decide how to differentiate and position itself in the
marketplace to serve target customer. -value propositions differentiate one brand from another; ‘why buy your brand rather than the
-design strong value proposition to get largest advantage in their target markets.
Marketing Management Orientations
-5 alternative concepts organizations use to design and carry out their marketing strategies:
1. The Production Concept: consumers will favour products that are available and highly
-focus should be on improving production and distribution efficiency.
-can lead to marketing myopia; runs the risk of focusing too narrowly on their own operations
and losing sight of the real objective (satisfying customer needs and building relationships)
2. The Product Concept: consumers will favour products that offer the most in quality,
performance and innovative features.
-focus should be on continuous product improvements.
-can lead to market myopia; better products aren’t always the better choice for the consumer
3. The Selling Concept: consumers will not buy enough of the firm’s products unless the company
undertakes a large-scale selling and promotion effort.
-often practiced with unsought goods (not normally bought, i.e. insurance, blood donations).
-track down prospects and sell them on product benefits; aggressive selling
-can lead to market myopia; creating sales transactions exceed importance of market needs.
4. The Marketing Concept: achieving organizational goals depends on knowing the needs and
wants of target markets and delivering the desired satisfactions better than competitors do
-the focus is on customer and value.
-not product-centred; customer-centred ‘sense and respond’ philosophy
-goal is to provide the right products for your customers [vs. right customers for the products]
Selling concept is an inside-out perspective.
Marketing concept is an outside-in perspective. [marketing department=customer
i. Starts with a well-defined market, focused on customer needs, integrate
marketing activities that affect customers.
1. Yields profits in lasting relationships with right customers based on
customer value and satisfaction.
ii. Research current customers to learn about their desires, new product/service
ideas and test proposed product improvements [clear need exist and customer
knows what they want]
iii. When customers don’t know what they want, customer-driven marketing is
needed. *“lead customers where they want to go before they know where they
want to go”+
5. The Societal Marketing Concept: questions if pure marketing concept overlooks possible
conflicts between consumer short-run wants and consumer long-run welfare. -marketing strategy should deliver value to customers in a way that maintains or improves both
the consumer’s and society’s well-being. [sustainable marketing]
Preparing an Integrated Marketing Plan and Program
-marketing strategy outlines which customers the company will serve and how it will create value
for these customers.
-marketer develops integrated marketing program that delivers intended value to target customers.
-marketing program uses marketing mix to build customer relationshipsclassified into four broad
groups; 4Ps [product, price, place and promotion]
-Deliver value proposition: create need-satisfying market offering, how much to charge for it, and
how to make the offering available to target consumers. Then communicate with the target
customers about the offering, and persuade about the merits.
-blend marketing mix into a comprehensive integrated marketing program communicate and deliver
the intended value to customers.
Building Customer Relationships
-the first 3 steps in the marketing process lead to the 4 important stepbuilding profitable
Customer Relationship Management: the overall process of building and maintaining profitable
customer relationships by delivering superior customer value and satisfactionone of the most
important concepts of modern marketing.
Relationship Building Blocks—Customer Value and Satisfaction: key is to create superior customer
value and satisfaction—more likely to be loyal customers and give the company a larger share of
Customer Value: customer buys from the firm that offers the highest customer-perceived value;
evaluation of the difference between all the benefits and costs of a market offering relative to
competitorscustomers don’t judge objectively but base on perceived value.
Customer Satisfaction: the extent to which a product’s perceived performance matches a buyer’s
-customer-centred firm seeks to deliver high customer satisfaction relative to competitors, but does
not attempt to maximize customer satisfaction—can always be one in lower price or increased
service [may result in lower profits]
-purpose of marketing is to generate customer value profitably—balance between making customer
value higher and more satisfied but not ‘give away the house’.
Customer Relationship Levels and Tools: company with low-margin customers seek basic
relationships. Customer with few customers and high margins create full partnerships.
-marketers can use specific marketing tools to develop stronger bonds with consumers, i.e. through
frequency marketing programs that reward frequent purchasers.
-can sponsor club marketing programs that offer 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: few firms today practice mass marketing
(standardized selling to any customers who comes along)
-realized that they don’t want relationships with every customer; only the profitable customers.
-use customer profitability analysis to pass up or week out losing customers and target winning ones
-many rather send business to competitors than take on unprofitable ones.
Relating More Deeply and Interactively: incorporating new and more interactive approaches that
help build targeted, two-way customer relationships.
-The technology used: emails, websites, blogs, cellphones, video sharing and social networks
-The change in communications environment changes how company and brand relate to consumers.
-A deeper sense of involvement and sense of community to the brand; ‘becoming a part of the
conversation between consumers is infinitely more powerful than handing down information via
traditional advertising’ *co-creation]
-The technology also have challenges: consumers have greater power and control—more
information on the brand and wealth of platforms for airing and sharing their brand
viewsembracing customer-managed relationships *customers, empowered by today’s new digital
technologies, interact with companies and with each other to shape their relationships with brands
-greater consumer control=not more marketing by intrusion but by attraction [market offerings and
messages that involve consumers rather than interrupt them.
-often create dialogues with consumers via their own existing online social networks—supplement
their campaigns and engage customers on a more personal and interactive level.
-Social media: need to find unobtrusive ways to enter consumers’ social conversations with
engaging and relevant brand messagessuccess=making relevant and genuine contributions to
consumer conversations, job is to be ‘part of other friends’ conversations’
-consumers themselves are creating brand conversations and message on their own; companies are
inviting consumers to play an active role in shaping the brand.
-consumer-generated marketing: brand exchanges created by consumers themselves by which
consumers are playing an increasing role in shaping their own brand experiences and those of other
consumers. [Significant marketing force]
-harnessing consumer-generated content is time-consuming and expensive; also hard to yield result.
Partner Relationship Management: marketers also have to be good at partner relationship
management [working closely with partners in other company departments and outside the
company to jointly bring greater value to customers]
Partners Inside the Company: old thinking—marketing is done by marketing, sales and customer-
-Today: every functional area can interact with customers especially electronicallyno matter what
department, you must understand marketing and be customer-focused.
-“marketing is too important to be left only to the marketing department” -firms link all the departments in cause of creating customer value—forming cross-fuctional
Marketing Partners Outside the Firm: most companies today are networked companies, relying
heavily on partnerships with other firms.
-companies strengthen their connections with partners all across the supply chain through supply
-fortune is not just dependent on performance—customer relationships also rest on how the entire
supply chain perform against competitors.
-treat suppliers as partners in delivering customer value.
Capturing Value From Customers
-final step is to capture value in return in current and future sales, market share, and profits
-superior customer value=highly satisfied customers who are loyal and repurchase=long-run returns
for the firm.
Creating Customer Loyalty and Retention: a small drop in satisfaction can cause a hug drop in
loyalty. The aim of customer relationship management is to create customer delight, not just
-economy tightens=more important emphasis on customer loyalty and retention: fewer customers
and less spending to go around.
-It’s 5 times cheaper to keep customer an old customer than to acquire a new one.
-losing a customer=more than losing a single sale=losing the entire stream of purchases that
customer would make over a lifetime of patronagecustomer lifetime value.
Growing Share of Customer: retaining good customers to capture customer lifetime value good
customer relationship management can help increase share of customers.
-to increase share of customers—offer greater variety to current customers, create programs to
cross-sell and upsell to market more products/services.
Building Customer Equity: companies will want to create profitable customers but to ‘own’ hem
for life, earn a great share of their purchases and to capture their customer lifetime value.
What is Customer Equity? Total combined customer lifetime values of all the company’s current and
potential customers=measure of the future value of the company’s customer base.
-more loyal the profitable customers, the higher the firm’s customer equity.
-customer equity is a better measurement of a firm’s performance than current sales or market
Building the Right Relationships with the Right Customers: company should view customers as
assets that need to be managed and maximized—but not all customers, even loyal ones, are good
-company can classify customers according to their potential profitability and manage its
relationships with them accordingly: each group requires a different relationship management
strategy. Potential High Butterflies: True Friends:
Profitability good fit between company’s good fit between company’s
offerings and customer’s needs; offerings and customer’s needs;
high profit potential highest profit potential
-not loyal, good fit between -loyalstrong fit between needs
offerings and their need, but efforts and offering
to make them loyal are rarely -want to make continuous
successful. relationship investments to delight
-capture their business as much as customers
possible -turn true friends into true believers
Low Strangers: Barnacles:
little fit between company’s limited fit between company’s
offerings and customer’s needs; offerings and customer’s needs; low
lowest profit potential profit potential
-little projected loyaltydon’t -highly loyal but not profitable
invest anything in them -limited fit between their needs and
-might be able to improve
profitability be selling them more,
raising their fees, or reducing
-should be ‘fired’
Short-term customers Long-term customers
Goal is to build the right relationships with the right customers
So, What is Marketing? Pulling it All Together [see figure 1.6 pg. 32]
Marketing is the process of building profitable customer relationships by creating value for
-gain full understanding of marketplace by researching customer needs and managing marketing
-design customer-driven marketing strategy based on: ‘what consumers will we serve?’ and ‘how
can we best serve targeted customers?’
-marketer outlines a value proposition that spells out what values the company will deliver to win
-construct integrated marketing program (4Ps) and provides real value to customers.
-develop product offers and create brand identities, price them to create real customer value and
distribute offers to make them available to communicate value proposition to target consumers and
persuade them to buy.
-most important is to build value-laden and profitable relationships with target customers—
satisfaction and delight.
-practice good customer relationship management and good partner relationship management -4 steps, create value for customers, last step is to use customer value to create value in sales and
-satisfied customers=long-time customers=full customer lifetime value and greater share of
customer=long-term higher customer equity
Company-Wide Strategic Planning: Defining Marketing’s Role
Strategic planning: process of developing and maintaining a strategic fit between
organization’s goal and capabilities and its changing marketing opportunities.
-set stage for rest of the planning required by the firm (usually annual plans, long-term
plans, to deal with current businesses and how to keep them going)
-strategic planning adapts the firm to take opportunity of the changing environments
-corporate level: the company starts strategic planning process by defining its overall
purpose and mission.
-mission turns into detailed supporting objectives that guide the company.
-HQ decides what portfolio of businesses and products is best for the co