Principles of Marketing
Global Edition
Kotler and Armstrong
Chapter 1:
Marketing
Creating Customer Value
and Engagement
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Marketing: Creating Customer Value and
Engagement
Amazon.com’s deep-down
passion for creating customer
engagement, value, and
relationships has made it the
world’s leading online retailer.
Amazon has become the model
for companies that are
obsessively and successfully
focused on delivering customer
value.
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What Is Marketing?
Marketing Defined
Marketing is a process by which companies create
value for customers and build strong customer
relationships in order to capture value from
customers in return.
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What Is Marketing?
Marketing Defined
Discuss examples of companies that are excellent at
marketing and how they reflect the definition
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What Is Marketing?
Marketing Goals
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The twofold goal of marketing is to:
• attract new customers by promising superior value
• grow current customers by delivering satisfaction
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What Is Marketing?
The Marketing Process
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Step 1: Understanding the Marketplace and Customer
Needs
• Five core
concepts
1) Customers have Needs, Wants, and Demands.
2) Companies offer products, services, & experiences “Market
Offerings” to fulfil such needs.
3) Customers seek Value and Satisfaction
4) Marketers build and maintain desirable exchange relationships.
5) Managing markets to bring about profitable customer
relationships.
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Understanding the Marketplace and Customer
Needs Customer Needs, Wants, and Demands
• States of
deprivation “e.g. Need
Needs Wants for food”
take “e.g. pizza
“e.g. needs for
knowledge”
specifically” “e.g.
business studies”
• Form that needs
Demands • Wants backed by buying power
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Understanding the Marketplace 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. The mistake of paying more
attention to the specific products they offer than to the benefits
and experiences produced by these products.
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Understanding the Marketplace and Customer
Needs Market Offerings – Products, Services, and Experiences
Marketing experiences:
More than just a mobile game app, Angry
Birds is “a digital immersion in addictively
cheerful destruction.” Creator Rovio plans to
expand the Angry Birds experience through
animated videos, licensed products, and even
Angry Birds-branded playgrounds and activity
parks.
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Understanding the Marketplace and Customer
Needs Customer Value and Satisfaction
Customers
• Value and
satisfaction
Marketers
• Set the right
level of
expectations
-Customers form expectations
about the value and satisfactions
that various market offerings will
deliver and buy accordingly.
-So Marketers need to set the
right level of expectations, not
too high or low.
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Customer Satisfaction and Customer perceived value
- Satisfied, unsatisfied and delighted customers
(Expected value vs actual value)
- Customer-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.
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Understanding the Marketplace and Customer
Needs Exchanges and Relationships
Exchange is the act of obtaining a desired object from someone
by offering something in return.
Marketing actions try to create, maintain, and grow desirable
exchange relationships.
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Understanding the Marketplace and Customer
Needs Markets
• Market is the set of all actual and potential buyers of a product
or service.
• These buyers share a particular need or want that can be
satisfied through exchange relationships.
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Step 2- Designing a Customer Value-Driven Marketing
Strategy
Selecting Customers to Serve
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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Selecting Customers to Serve
Market segmentation refers to dividing the markets into
segments of customers.
Target marketing refers to which segments to go after.
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Choosing a Value Proposition
A brand’s value proposition is the set of benefits or values it promises
to deliver to customers to satisfy their needs.
BMW promises “the ultimate driving machine”
New Balance’s Minimus shoes are “like barefoot only better.”
Facebook helps you “connect and share with the people in your life”
YouTube “provides a place for people to connect, inform, and inspire
others across the globe.”
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Marketing Management Orientations
There are five alternative concepts under which organizations design
and carry out their marketing strategies: the production, product,
selling, marketing, and societal marketing concepts.
Marketing management wants to design strategies that will build
profitable relationships with target consumers.
But what philosophy should guide these marketing strategies? What
weight should be given to the interests of customers, the organization,
and society? Very often, these interests conflict.
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Marketing Management Orientations
concept
Product
concept
Production
Selling
concept
Marketing
concept
Societal
Marketing
concept
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Strategy
Customers Seek
Marketing Focus
Production Concept
Available and affordable
products
Improve production and
distribution
Product Concept
Quality, performance and
innovation
Continuous Improvements
Selling Concept
Selling and promotion to buy
Track prospects and sell
them
benefits
(ex:
insurance)
Marketing Concept
Need satisfaction
Customer needs, how to
satisfy them and creating
customer value
Societal Concept
Ch 1 -
Long run welfare as well as
short run wants
Deliver value to customers
that
improves
both
customers and society’s
well being
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Designing a Customer Value-Driven Marketing
Strategy Marketing Management Orientations
Production concept:
Consumers will favor products that are available and highly
affordable.
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Designing a Customer Value-Driven Marketing
Strategy Marketing Management Orientations
Product concept:
Consumers favor products that offer the most quality,
performance, and features.
The focus is on continuous product improvements.
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Designing a Customer Value-Driven Marketing
Strategy Marketing Management Orientations
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Designing a Customer Value-Driven Marketing
Strategy Marketing Management Orientations
Selling concept:
Consumers will not buy enough of the firm’s products unless the
firm undertakes a large-scale selling and promotion effort.
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Designing a Customer Value-Driven Marketing
Strategy Marketing Management Orientations
Marketing concept:
Know the needs and wants of the target markets and deliver
the desired satisfactions better than competitors.
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Designing a Customer Value-Driven Marketing
Strategy Marketing Management Orientations
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Designing a Customer Value-Driven Marketing
Strategy Marketing Management Orientations
Societal marketing:
The company’s marketing decisions should consider consumers’
wants, the company’s requirements, consumers’ long-run
interests, and society’s long-run interests.
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Step 3 - Preparing an Integrated Marketing Plan and Program
The marketing mix is the set of tools (four Ps) the firm uses to
implement its marketing strategy. This set includes product,
price, promotion, and place.
The firm blends all of these marketing mix tools into a
comprehensive
integrated
marketing
program
that
communicates and delivers the intended value to chosen
customers.
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• To deliver on its value proposition, the firm must first create a
need-satisfying market offering (product).
• It must then decide how much it will charge for the offering
(price) and,
• how it will make the offering available to target consumers
(place).
• Finally, it must engage target consumers, communicate about
the offering, and persuade consumers of the offer’s merits
(promotion).
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Step 4 - Building Customer Relationships
Customer Relationship Management
The first three steps in the marketing process—understanding the
marketplace and customer needs, designing a customer value
driven marketing strategy, and constructing a marketing
program— all lead up to the fourth and most important step:
building and managing profitable customer relationships.
Customer relationship management is the overall process of
building and maintaining profitable customer relationships by
delivering superior customer value and satisfaction.
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Customer Relationship
Management Customer Relationship
Levels and Tools
Basic Relationships
– low-margin
customers
Full Partnerships
– high-margin
customers
Frequency
Marketing
Programs – reward
customers
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Engaging Customers
Customer-Engagement and Today’s Digital and Social Media
Customer-Engagement Marketing makes the brand a meaningful
part of consumers’ conversations and lives by fostering direct and
continuous customer involvement in shaping brand
conversations, experiences, and community.
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Engaging Customers
Consumer-Generated Marketing
Brand
exchanges
created
by
consumers
themselves— both invited and uninvited—by which
consumers are playing an increasing role in shaping
their own brand experiences and those of other
consumers.
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Partner Relationship Management
In addition to being good at customer relationship management,
marketers must also be good at partner relationship
management
Partner relationship management involves working closely with
partners in other company departments and outside the
company to jointly bring greater value to customers.
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Step 5 - Capturing Value from Customers
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.
At Stew Leonard’s profitable four-store supermarket, the lifetime
revenue of a customer is $50,000. Because his average customer spends
about $100 a week, shops 50 weeks a year, and remains in the area for
about 10 years, losing one customer can be a significant loss.
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Growing Share of Customer
Share of customer is the portion of the customer’s purchasing
that a company gets in its product categories.
banks want to increase “share of wallet.”
airlines want greater “share of travel.”
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Building Customer Equity
The ultimate aim of customer
relationship management is to
produce high customer equity.
it’s a measure of the future
value
of the company’s customer
base.
Customer equity is the total
combined customer lifetime
values of all the company’s
customers.
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Building Customer Equity
Building the Right Relationships with the Right Customers
Strangers show low potential
profitability and little projected loyalty.
Butterflies are potentially profitable but
not loyal.
True friends are both profitable and
loyal.
Barnacles are highly loyal but not very
profitable.
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The Changing Marketing Landscape
The Digital Age: Online, Mobile, and Social Media Marketing
Digital and social media marketing involves
using digital marketing tools such as web
sites, social media, mobile ads and apps,
online videos, e-mail, and blogs that
engage consumers anywhere, at any time,
via their digital devices.
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What Happens in an Internet Minute in
2022?
The Changing Marketing Landscape
- The Digital Age: technologies created new ways to learn about
and to reach customers.
- Not-for-Profit: marketing has become a major part of the
strategies for many not-for-profit organizations, such as
colleges, hospitals & museums.
- Rapid Globalization: Marketers are now connected globally with
their customers and marketing partners. Touched by global
competition.
- Sustainable Marketing: Marketers are being called upon to take
greater responsibility for the social and environmental impact of
their actions.
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