CHAPTER 1
MARKETING:
Managing Profitable
Customer
Relationships
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.
Copyright 2007, Prentice-Hall Inc.
1-2
Marketing Defined
A social and managerial process by
which individuals and groups obtain
what they need and want through
creating and exchanging products
and value with others.
Old View:
“Telling and Selling”
Copyright 2007, Prentice-Hall Inc.
New View:
Satisfying Needs
1-3
Figure 1-1
A Simple Model of the Marketing Process
Copyright 2007, Prentice-Hall Inc.
1-4
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
Copyright 2007, Prentice-Hall Inc.
1-5
Needs, Wants, and Demands
 Needs:
– A state of felt
deprivation
including
physical,
social, and
individual
needs.
Name some specific examples of each need type.
Copyright 2007, Prentice-Hall Inc.
1-6
Needs, Wants, and Demands
 Types of Needs:
– Physical:
 Food, clothing,
shelter, safety
– Social:
 Belonging,
affection
– Individual:
 Self-expression, learning, knowledge
Copyright 2007, Prentice-Hall Inc.
1-7
Needs, Wants, and Demands
 Wants:
– Form that a
human need
takes, as shaped
by culture and
individual
personality.
– Preferences for
brands are wants.
Copyright 2007, Prentice-Hall Inc.
1-8
Needs, Wants, and Demands
 Wants
– Given their wants
and resources,
people will demand
products with
benefits that add
up to the greatest
value and
satisfaction.
Copyright 2007, Prentice-Hall Inc.
1-9
Marketing Offers
Some combination of products,
services, information, or experiences
offered to a market to satisfy a need
or want.
Needs and wants are fulfilled
through a marketing offer.
Copyright 2007, Prentice-Hall Inc.
1-10
Marketing Offers
 Products:
– Anything that can be offered to a market
to satisfy a need or want.
 Services:
– Activity or benefit offered for sale that is
essentially intangible and does not result
in the ownership of anything.
 Consumer Experiences:
– “Dazzle their senses, touch their hearts,
and stimulate their minds.”
Copyright 2007, Prentice-Hall Inc.
1-11
Marketing in Action
Products Can Be Ideas
Products do not have
to be physical objects.
Here the “product” is
an idea -- protecting
animals.
Products can also be
people, organizations,
places, or information.
Copyright 2007, Prentice-Hall Inc.
1-12
Marketing Myopia
 Successful marketers avoid Marketing
Myopia when constructing offers:
– Marketing myopia occurs when sellers
pay more attention to the specific
products they offer than to the benefits
and experiences produced by the
products.
 They focus on the “wants” and lose
sight of the “needs.”
Copyright 2007, Prentice-Hall Inc.
1-13
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.
Copyright 2007, Prentice-Hall Inc.
1-14
Value and Satisfaction
 Setting proper expectations is critical:
– 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.
Copyright 2007, Prentice-Hall Inc.
1-15
Marketing in Action
Setting Expectations
This tongue in cheek
ad pokes fun at the
advertising industry’s
tendency toward
hyperbole when setting
consumer expectations
for goods and services.
Who is being targeted?
Does this ad set the
proper expectations?
Copyright 2007, Prentice-Hall Inc.
1-16
Marketing in Action
Bartering Via the Web
The Internet helps brings buyers,
sellers, and those interested in
bartering together.
SWAPACE and The Barter Company
are two Web sites that enable
individuals or businesses to barter,
swap, or buy products and services.
swapace.com
Copyright 2007, Prentice-Hall Inc.
barterco.com
1-17
Markets
 What Is a Market?
– The set of actual
and potential
buyers of a product.
Market for
Harley-Davidson
– These people share
a need or want that
can be satisfied through exchange
relationships.
Copyright 2007, Prentice-Hall Inc.
1-18
Market
 A sphere where exchange takes place.
 Examples?
Copyright 2007, Prentice-Hall Inc.
1-19
Figure 1-2
Elements of a Modern Marketing System
Copyright 2007, Prentice-Hall Inc.
1-20
Designing Marketing Strategies
 Marketing Management:
– The art and science of choosing target markets
and building profitable relationships with them.
 Designing a winning customer-driven
marketing strategy requires answers to the
following questions.
– What customers will we serve?
What is our target market?
– How can we best serve these customers?
What is our value proposition?
Copyright 2007, Prentice-Hall Inc.
1-21
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.
Copyright 2007, Prentice-Hall Inc.
1-22
Let’s Talk!
Are you part of the
target market for this
product?
List the personal
traits, variables, or
factors that
characterize members
of this market
segment.
Copyright 2007, Prentice-Hall Inc.
1-23
Marketing 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.
Copyright 2007, Prentice-Hall Inc.
1-24
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
Copyright 2007, Prentice-Hall Inc.
1-25
Value Proposition
 The set of benefits
or values a
company promises
to deliver to
consumers to
satisfy their needs.
www.gain.com
Copyright 2007, Prentice-Hall Inc.
It cleans and freshens
like sunshine!
1-26
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
Copyright 2007, Prentice-Hall Inc.
1-27
Figure 1-3
Marketing and Sales Concepts Contrasted
Copyright 2007, Prentice-Hall Inc.
1-28
Figure 1-4
The Societal Marketing Concept
Copyright 2007, Prentice-Hall Inc.
1-29
The Marketing Mix
 The marketing plan transforms the
marketing strategy into action.
 The marketing plan includes the
marketing mix:
– Product
– Price
– Promotion
– Place
Copyright 2007, Prentice-Hall Inc.
Product
Price
Buyer
Needs
Place
Promotion
1-30
Customer Relationship Management
 The process of
building and
maintaining
profitable customer
relationships by
delivering superior
customer value and
satisfaction.
Copyright 2007, Prentice-Hall Inc.
1-31
Perceived Value vs. Satisfaction
Perceived Value:
The customer’s
evaluation of the
difference between
all the benefits and
all the costs of a
marketing offer
relative to those of
competing offers.
Copyright 2007, Prentice-Hall Inc.
Customer
Satisfaction:
Dependent on the
product’s perceived
performance relative
to a buyer’s
expectations.
Don’t promise more than
the product can deliver!
1-32
Customer Relationships
 Relationships can be built at many levels



using a variety of tools
Selective relationship management is key
Creating long-term profitable
relationships with
Video Snippet
customers is
Harley-Davidson builds
the goal
customer relationships by
means of the social
Direct marketing
benefits of HOGS, the
Harley-Davidson
owners group.
Copyright 2007, Prentice-Hall Inc.
1-33
Partner Relationship Marketing
Partners . . .
Inside the Firm
 All employees

customer focused
Teams coordinate
efforts toward
customers
Copyright 2007, Prentice-Hall Inc.
Partners . . .
Outside the Firm
 Supply chain

management
Strategic alliances
1-34
Capturing Value from Customers
 Superior
customer value
results in:
– Customer loyalty
and retention
– A growing share
of customers
– Customer equity
Copyright 2007, Prentice-Hall Inc.
1-35
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.
Copyright 2007, Prentice-Hall Inc.
1-36
Marketing in Action
Focus on Customer Lifetime Value
To keep customers coming back, Stew Leonard’s has
created the “Disneyland of dairy stores.”
Copyright 2007, Prentice-Hall Inc.
1-37
Customer Equity
 Customer equity
is the total
combined
customer lifetime
values of all the
company’s
customers.
Copyright 2007, Prentice-Hall Inc.
1-38
Figure 1-5
Customer Relationship Groups
Copyright 2007, Prentice-Hall Inc.
1-39
The New Marketing Landscape
 Trends and forces constantly change the
marketing landscape and create marketing
strategy challenges. Major developments
impacting marketers include:
– The new digital age
– Rapid globalization
– Call for more ethics
and social responsibility
– Growth of not-for-profit
marketing
Copyright 2007, Prentice-Hall Inc.
1-40
Figure 1-6
Expanded Model of the Marketing Process
Copyright 2007, Prentice-Hall Inc.
1-41