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Canada (158,391)
MGMA01H3 (184)
Chapter 1

Chapter 1 - Marketing: Creating and Capturing Customer Value

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University of Toronto Scarborough
Management (MGM)
Tarun Dewan

Chapter 1 – Marketing: Creating and  Capturing Customer V alue  Marketing: process by which companies create value for customers and build strong customer relationships in order to capture value from customer in return The Marketing Process  Understanding the marketplace needs and wants  (1) Customer Needs, Wants, and Demands • Needs: states of felt deprivation; include physical, social and individual needs • Wants: the form human needs take as they are shaped by culture/society and individual personality • Demands: human wants backed by power (2) Market Offerings – Products, Services and Experiences • Market offerings: some combination of products, services, information, or experiences offered to a market to satisfy a need or want • also include: persons, place, organizations, information and ideas • marketing myopia: the mistake of paying more attention to the specific products a company offers than to the benefits and experiences produced by these products • smart marketers create brand experiences for consumers  example: you don’t just watch the NASCAR race, you’re involved in the exhilarating, high-octane NASCAR experience (3) Customer Value and Satisfaction • Satisfied customers: buy again & tell others about their experiences • Dissatisfied customers: switch to competitors and criticize the product to others • Too low expectations by marketers = may satisfy those who buy but fail to attract enough buyers • Too high expectations by marketers = buyers will be disappointed • Customer value and satisfaction are key building blocks for developing and managing customer relationships (4) Exchanges and Relationships • Satisfying needs and wants through exchange relationships • Exchange: the act of obtaining a desired object from someone by offering something in return • Build and maintain desirable exchange relationships with target audience • Attracting new customers and retaining customers for business growth • Build strong relationships by consistently delivering superior customer value (5) Markets • Market: a set of all actual and potential buyers of a product or service • Marketing involves managing markets to create profitable customer relationships • Core marketing activities: consumer research, product development, communication, distribution, pricing, and service • Consumer marketing:  Market what they’re searching for  Interact with companies to obtain information  Make purchases • Markets deal with customer relationship management (How can we reach our customers?) & customer-managed relationships (How should our customers reach us?) A Modern Marketing System Marketing Consumers Suppliers Company Intermediaries Each party is affected by major Competitorsnmental forces (demographics, economic, natural, technological, political and social/cultural)  Each party in the system adds value for the next level  Arrows = relationships that must be developed and managed Designing and Customer­Driven Marketing Strategy • Marketing management: the art and science of choosing target markets and building profitable relationships with them • Marketing managers aim: find, attract, keep and grow target customers by creating, delivering and communicating superior customer value • Outlines which customers it will serve and how it will create value for these customers • What customers will we serve? How can we serve these customers best? (1) Selecting Customers to Serve • Market segmentation and target marketing • Select customers it can serve well and profitably • Marketing managers must choose their target and decide on the level, timing, and nature of their demand • Marketing management is customer management and demand management (2) Choosing a Value Proposition • How will it serve targeted customers? • How it will differentiate and position itself in the marketplace? • Value proposition: is the set of benefits or values it promises to deliver to consumers to satisfy their needs (used to differentiate brands) (3) Marketing Management Orientations • Design strategies that will build profitable relationships with target consumers • 5 concepts under which organizations design and carry out their marketing strategies: 1) The Production Concept: The idea that consumers will favour products that are available and highly affordable and that the organization should therefore focus on improving production and distribution efficiency  Disadvantage: lead to marketing myopia where companies focus too narrowly on their own operations and lose sight of the real object which is to satisfy customer needs and building customer relationships 2) The Product Concept: The idea that consumers will favour products that offer the most in quality, performance, and innovative features and that the organization should therefore devote its energy to making continuous product improvements  Disadvantage: lead to marketing myopia where companies focus only on the company’s products and lose sight of the real situation which may be the customer’s need for a better solution not a better product 3) Selling Concept: The idea that consumers will not buy enough of the firm’s products unless it undertakes a large-scale selling and promotion effort  Disadvantage: aggressive selling holds high risks as it focuses more on sale transactions rather than building long term, profitable customer relationships. The company‘s aim is to sell what the company makes rather than making what the market wants 4) The Marketing Concept: A philosophy that holds that achieving organizational goals depends on knowing the needs and wants of target markets and delivering the desired satisfactions better than competitors do  Aim: to find the right products for your customers  Sometimes customers don’t know what they wants and that calls for customer driving marketing which is understanding customer needs netter than the customers themselves do and creating products and services that meet existing and hidden needs, now and the in the future 5) The Societal Marketing Concept: The idea that a company’s marketing decisions should consider consumers’ wants, the company’s requirements, consumers’ long-run interests, and society’s long-run interests  3 Considerations Underlying the Societal Marketing Concept Society (human welfare) Societal Marketing Concept Consumers Company (want (profits) satisfaction) Preparing and  Integrated Marketing  Plan and  Program  • Deliver intended value to target customers • Marketing program builds customer relationships by transforming market strategy into action • Consists of marketing mix which is a set of marketing tools used by the fire to implement its marketing strategy, this is classified into 4 broad groups: 1) Product – firm must create a need-satisfying market offering 2) Price – firm decide how much it will charge for the offering 3) Place – how it will make the offering available to target consumers 4) Promotion – communicate with target consumers about the offering and persuade them of its merits • Each marketing tool must be blend into a comprehensive integrated marketing program that communicates and delivers value to chosen customers Building Customer Relationships Customer Relationship Management  • Overall process of building and maintaining profitable customer relationships by delivering superior customer value and satisfaction Relationship Building Blocks: Customer Value and Satisfaction • Key to building lasting customer relationships is to create superior customer value and satisfaction • Customer Value o Customer buys from the firm that offers the highest customer-perceived value which is the customers evaluation of the difference between all benefits and all costs of a marketing offer relative to those of competing offers o Each customer has their own personal value perceptions • Customer Satisfaction o Customer satisfaction: the extent to which a product’s perceived performance matches a buyer’s expectations o Higher customer satisfaction leads to greater customer loyalty o Delighted customers become customer evangelists who spread the word about their good experiences o For companies focusing on delighting customers, exceptional value and service become part of the overall company culture o The purpose of marketing is to generate customer value profitable which includes satisfying customers and maintaining high profits for the company Customer Relationship Levels and Tools  • Frequency marketing programs – reward customers who buy frequently or in large amounts • Club marketing programs – offer members special benefits and create member communities The Changing Nature of Customer Relationships  • The important trends in the way companies and customers are relating to one another Relating with More Carefully Selected Customers • target fewer, more profitable customers • companies use customer profitability analysis to weed out losing customers and target winning ones • one approach to weed out losing customers is to pre-emptively screen out potentially unprofitable c
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