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Marketing: Creating Customer Value and
Engagement
What is Marketing?
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.
The American Marketing Association (AMA) defines marketing as:
Marketing is the activity, set of institutions, and processes for creating,
communicating, delivering, and exchanging offerings that have value for
customers, clients, partners, and society at large.
The Marketing Process: Creating and
Capturing Customer Value
Core Marketing Concept :
Needs, wants and demands Products and Services Value, satisfaction and quality
Exchange, transactions and relationships Markets
Step 1: Understanding the Marketplace and
Customer Needs
Needs
–​ States of felt deprivation
–​ Needs can be basically divided into Physical Needs, Social Needs, and
Individual Needs.
Wants
–​ The form of needs as shaped by culture and the individual
–​ Specific objects to fulfill our needs
Ex: hunger is a need but the type of food is a want
Demands
–​ Wants which are backed by buying power
–​ Willingness and ability to buy Wants and needs
Human needs include: basic physical needs for food, clothing, warmth, and safety;
social needs for belonging and affection; and individual needs for knowledge and
self-expression.
Wants are the form human needs take as they are shaped by one’s society and are
described in terms of objects that will satisfy those needs.
When backed by buying power, wants become demands.
Outstanding marketing companies go to great lengths to learn about and understand
their customers’ needs, wants, and demands.
EXAMPLE :Airbnb’s CEO Brian Chesky and co-founder Joe Gebbia regularly stay at
the company’s host locations, helping them shape new customer solutions based on
real user experiences.
•​ Market offerings are some combination of products, services,
information, or experiences offered to a market to satisfy a need or
want.
Market offerings include other entities, such as persons, places, organizations,
information, and ideas.
Many sellers suffer from marketing myopia, the mistake of paying more attention to
the specific products they offer than to the benefits and experiences produced by
these products. They forget that a product is only a tool to solve a consumer
problem. These sellers will have trouble if a new product comes along that serves
the customer’s needs better or less expensively. The customer will have the same
need but will want the new product.
-More than just selling products, Apple’s highly successful retail stores create
engaging life-feels-good brand experiences.
Customers form expectations about the value and satisfaction of market
offerings.
Value
–​ Value is the benefits buyers receive that meet their needs. In other
words, value is what the customer gets by purchasing and consuming
a company’s offering.
–​ Customers form expectations regarding value
–​ Marketers must deliver value to consumers
Satisfaction
–​ Customer satisfaction depends on a product‘s perceived performance
in delivering value relative to a buyer‘s expectations
–​ A satisfied customer will buy again and tell others about their good
experience
–​ Dissatisfied customers switch to competitors
Marketers should set the right level of expectations. If they set expectations too low,
they may satisfy those who buy, but fail to attract enough buyers. If they set
expectations too high, buyers will be disappointed.
Customer value and customer satisfaction are key building blocks for developing and
managing customer relationships.
Marketing occurs when people decide to satisfy their needs and wants through
exchange relationships. Exchange is the act of obtaining a desired object from
someone by offering something in return. Marketing consists of actions taken to
create, maintain, and grow desirable exchange relationships with target audiences
involving a product, service, idea, or other object. Companies want to build strong
relationships by consistently delivering superior customer value.
Understanding the Marketplace : core concepts
Exchange
–​ A marketing exchange is what happens any time two or more people
trade goods or service
–​ The act of obtaining a desired object from someone by offering something
in return
–​ One exchange is not the goal, relationships with several exchanges are
the goal
–​ Relationships are built through delivering value and satisfaction
A market is the set of actual and potential buyers.
Consumers market when they:
•​ search for products
•​ interact with companies to obtain information
•​ make purchases
Sellers must search for buyers, identify their needs, design good market offerings,
set prices for them, promote them, and store and deliver them. Although marketing
was traditionally carried out by sellers, the concept now also includes consumers.
Consumers engage in marketing when they search for products, interact with
companies to obtain information, and make their purchases. Thus, in addition to
customer relationship management, companies must also deal with
customer-managed relationships as customers are empowered and marketing is
made a two-way affair.
Each party in the system adds value for the next level and is affected by major
environmental forces (demographic, economic, natural, technological, political, and
social/cultural).
Marketing means managing markets to bring about profitable customer relationships.
Activities such as consumer research, product development, communication,
distribution, pricing, and service are core marketing activities.
Buyers also carry out marketing. Thus, in addition to customer relationship
management, today’s marketers must also deal effectively with customer-managed
relationships.
Marketers are no longer asking only “How can we influence our customers?” but also
“How can our customers influence us?” and even “How can our customers influence
each other?”
By creating value for customers, marketers capture value from customers in return.
This five-step process forms the marketing framework for the rest of the chapter and
the remainder of the text.
This figure presents a simple, five-step model of the marketing process for creating
and capturing customer value. In the first four steps, companies work to understand
consumers, create customer value, and build strong customer relationships. In the
final step, companies reap the rewards of creating superior customer value.
The rewards are in the form of sales, profits, and long-term customer equity.
Step 2: Designing a Customer Value-Driven
Marketing Strategy (1 of 6)
Marketing management is the art and science of choosing target markets and
building profitable relationships with them.
•​ What customers will we serve (target market)?
•​ How can we best serve these customers (value proposition)?
Designing a Customer Value-Driven Marketing
Strategy (2 of 6)
A brand’s value proposition is the set of benefits or values it promises to deliver to
customers to satisfy their needs.
For example , Coca-Cola's value propositions consist of its vast selection of
beverages that are associated with celebrations and positive feelings., BMW
promises “the ultimate driving machine.”
Value propositions differentiate one brand from another. They answer the customer’s
question, “Why should I buy your brand rather than a competitor’s?” Companies
must design strong value propositions that give them the greatest advantage in their
target markets.
•​ What customers will we serve?
–​ Market segmentation and target marketing
–​ Marketers select customers that can be served profitably
–​ Known as customer management and demand management
•​ How can we serve these customers best?
–​ By defining a value proposition that will differentiate and position the
brand in the marketplace
–​ Is set of benefits or values a company promises to deliver to consumers
in order to satisfy their needs
(3 of 6)
(4 of 6)
Figure 1.3 Selling and Marketing Concepts Contrasted
The selling concept takes an inside-outside view that focuses on existing products
and heavy selling. The aim is to sell what the company makes rather than making
what the customer wants
The marketing concept starts with a well-defined market, focuses on customer
needs, and integrates all the marketing activities that affect customers. In turn, it
yields profits by creating relationships with the right customers based on customer
value and satisfaction.
(5 of 6):
The societal marketing concept questions whether the pure marketing concept
overlooks possible conflicts between consumer short-run wants and consumer
long-run welfare. Is a firm that satisfies the immediate needs and wants of target
markets always doing what’s best for its consumers in the long run?
It calls for sustainable marketing, socially and environmentally responsible marketing
that meets the present needs of consumers and businesses while also preserving or
enhancing the ability of future generations to meet their needs.
Even more broadly, many leading business and marketing thinkers are now
preaching the concept of shared value, which recognizes that societal needs, not just
economic needs, define markets.
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.
Step 3: Designing a Customer Value-Driven
Marketing Strategy
Build customer relationships by transforming the marketing strategy into action
The marketing mix the set of marketing tools the firm uses to implement its
marketing strategy, a set of tools known as the four Ps:
–​ Product (create a need satisfying market offering)
And then decide
–​ Price ( How much it will charge for the offerings)
–​ Place (How it will make it available to the target)
–​ Promotion ( How to communicate with the target and persuade them of
its merit)
The firm must blend each marketing mix tool into a comprehensive integrated
marketing program that communicates and delivers the intended value to chosen
customers.
Step 4: Managing Customer Relationships and
Capturing Customer Value
Customer relationship management—the overall process of building and
maintaining profitable customer relationships by delivering superior customer value
and satisfaction. It deals with all aspects of acquiring, keeping and growing
customers.”
•​ It is about managing detailed information about customers and carefully managing
customers touchpoints to maximize customer loyalty.
(Touchpointcan be defined as any way a consumer can interact with a business,
whether it be person-to-person, through a website, an app or any form of
communication )
By this definition, it involves managing detailed information about individual
customers and carefully managing customer touchpoints to maximize customer
loyalty.
In the broader sense, customer relationship management is the overall process of
building and maintaining profitable customer relationships by delivering superior
customer value and satisfaction. It deals with all aspects of acquiring, engaging, and
growing customers.
Managing Customer Relationships and
Capturing Customer Value (2 of 9)
Relationship Building Blocks
•​ Customer-perceived value
–​ The customers’ evaluation of the difference between benefits and costs.
–​ Customers often do not judge values and costs accurately or objectively.
•​ Customer satisfaction
–​ The extent to which perceived performance matches a buyer’s
expectations
Most studies show that higher levels of customer satisfaction lead to greater
customer loyalty, which in turn results in better company performance. Smart
companies aim to delight customers by promising only what they can deliver and
then delivering more than they promise.
Delighted customers not only make repeat purchases but also become willing
marketing partners and “customer evangelists” who spread the word about their
good experiences to others.
The Changing Nature of Customer
Relationships
Customer engaged marketing : goes beyond just selling a brand to consumers
Fosters direct and continuous customer involvement in shaping brand conversations,
experiences, and community
Consumer generated marketing : brand exchanges created by consumers
themselves. Consumers are playing an increasing role in shaping their own brand
experiences (ex. My Starbucks Idea)
Managing Customer Relationships and
Capturing Customer Value
Partner relationship management involves working closely with partners in other
company departments and outside the company to jointly bring greater value to
customers.
•​Partners Inside the Company
•​Partners Outside the Firm
–​ Strategic partners
–​ Supply chain management
Marketers must also partner with suppliers, channel partners, and others outside the
company.
Step 5: Managing Customer Relationships and
Capturing Customer Value
•​ Creating Customer Loyalty and Retention
–​ Customer delight leads to emotional relationships and loyalty.
–​ Customer lifetime value shows true worth of a customer
•​ Growing Share of Customer
–​ Share of customer’s purchase in a product category
–​ Achieved through offering greater variety, cross-sell and up-sell strategies
Upselling is the practice of encouraging customers to purchase a comparable
higher-end product than the one in question, while cross-selling invites customers
to buy related or complementary items
upselling and cross-selling are mutually beneficial when done properly, providing
maximum value to customers and increasing revenue without the recurring cost of
many marketing channels.
Capturing Value from Customers
•​ Building Customer Equity
–​ The combined customer lifetime values of all current and potential
customers
–​ Measures a firm’s performance, but in a manner that looks to the future
(Customer lifetime value is the sum total of the money you expect to make
from a customer )