Marketing: An Introduction
Armstrong, Kotler
Chapter One
Marketing: Managing Profitable
Customer Relationships
Looking Ahead
• Define marketing and the marketing processes.
• Explain the importance of understanding
customers and the marketplace.
• Identify the five core marketplace concepts.
• Identify the key elements of a customer-driven
marketing strategy.
• Discuss customer relationship management and
ways of creating and obtaining value.
• Describe the major trends and forces changing
today’s marketing landscape.
What is marketing?
Marketing is building profitable customer relationships.
The aim of marketing is to create value for customers
and to capture value in return. Companies know if they
take care of their customers ( delivering on their
promises) , market share and profits will follow.
Definition:
We define marketing as a social and managerial process
by which individuals and groups obtain what they need
and want through creating and exchanging value with
others.
The Marketing Process
• Understand the marketplace and customer
needs and wants.
• Design a customer-driven marketing strategy.
• Construct a marketing program that delivers
superior value.
• Build profitable relationships and create
customer delight.
• Capture value from customers to create
profits and customer equity. Figure 1
Marketing process
Figure 1
Capture value from
Customers to
Create profits and
Customer quality
Build profitable
Relationships and
Create customer
delight
Construct a
Marketing program
That delivers
Superior value
Design a
Customer-driven
Marketing strategy
Understand
The marketplace
And customer needs
And wants
• Understanding the marketplace and consumer needs:
There are five core marketplace concepts;
1- Needs, wants, and demands ;
• Needs are states of felt deprivation. All
humanity have the same needs;
– Physical needs:
• Food, clothing, shelter, safety.
– Social needs:
• Belonging, affection.
– Individual needs:
• Learning, knowledge, self-expression
• Understanding the marketplace and consumer needs:
There are five core marketplace concepts;
• Wants; are needs shaped by culture and
individual personality. Example; An American
needs for food but wants a Big Mac. A Chinese
needs for food but wants frog legs.
• Demands are wants combined with buying
power. Example; Porsche or Kia.
Marketers spends time and money for a market
research to understand the customer’s needs,
wants, and demands.
• Understanding the marketplace and consumer needs:
•
•
•
•
There are five core marketplace concepts;
2- Products, Services, Experiences
consumer needs and wants are fulfilled through
a marketing offer, which is some combination of
products, services, or experiences offered to a
market to satisfy a need.
Products; tangible, like food, goods…etc.
Services; intangible, banking, telecom…etc.
Experiences; Brand experiences, like theater.
• Understanding the marketplace and consumer needs:
Marketing Myopia
• 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.”
• An article published by Harvard Business school
defined the term “marketing Myopia”;
- Marketing myopia is true for all companies who define
their markets too narrowly. urging organizations to
define their industries broadly to take advantage of
growth opportunities. Experience shows that when a
business has redefined its market, it has continued to
grow as new targets are set .
• Understanding the marketplace and consumer needs:
There are five core marketplace concepts;
3- Value and Satisfaction
• If the performance and the customer’s
experience is lower than expectations, then
customer satisfaction is low.
• If the performance and the customer’s
experience meets expectations, then the
customer is satisfied.
• If the performance and the customer’s
experience exceeds expectations, then the
customer is delighted.
• Understanding the marketplace and consumer needs:
There are five core marketplace concepts;
4- Exchange, transactions, and
relationships
• Exchange.
– The act of obtaining a desired object from someone
by offering something in return.
• Transaction
- consists of a trade values between two parties.
The goal of marketers is to build solid relationship
with customers and retaining them by delivering
superior value.
• Understanding the marketplace and consumer needs:
There are five core marketplace concepts;
5- Markets
The set of all actual and potential buyers of a
product. Sellers must search for buyers, both
buyers and sellers are carried out by marketing.
- Elements of a Modern Marketing systems
Figure 2
Elements of a Modern Marketing systems
Figure 2
Company
Marketing
Intermediaries
Supplier
Competitors
Final
Consumers
• Designing a customer- driven marketing strategy
Once it fully understands consumers and the
marketplace, marketing management can design a
customer-driven marketing strategy.
Customer-Driven Marketing;
• Divide markets into segments.
• Choose the right segment to target.
• Offer a unique value proposition.
• Differentiate your offer from competitor offers.
• Build customer value and satisfaction.
• Building long-term customer relationships
• Designing a customer- driven marketing strategy
Marketing Management
The art and science of choosing target markets
and building profitable relationships with them.
Two questions should be asked here;
_ What customers will we serve? (our target)
_ How can we serve them best? ( Value)
• Designing a customer- driven marketing strategy
Segmentation and Targeting
Selecting customer to serve; first dividing the
market into segments, Second select the segment to
be our target market. Porsche company target
customers with high income.
• Deciding on a value proposition; A set of
benefits or values it promises to deliver to
consumers to satisfy their needs. means the
company must decide how it will differentiate itself
from other competitors. Porsche promises driving
performance and excitement. They say” what a dog
feels when the leash breaks”.
A philosophy should guide the marketing strategy
to any company.
The philosophy could be one or more of the
following;
1. Production; affordability and availability.
2. Product -- quality and innovation.
3. Selling -- promotion and hard selling.
4. Marketing -- customer satisfaction and
relationships.
5. Societal – long-term value to both customer
and society.
1- Production philosophy;
it holds that consumers will favor products that
are available and highly affordable. It’s effective
strategy in two situations:
-When a demand for a product exceeds the supply.
-When the product cost is too high, and improve
productivity is needed to reduce the cost, to gain
market share.
Example; Evian water, McDonalds.
2- Product philosophy;
holds that consumers will favor a products that
offer the most in quality, performance, and
innovative features.
In this case the company should focus on the
continuous improving.
Examples; Nokia Mobile, Motorola, Sony..
3- Selling philosophy;
Holds that the customer will not buy enough of
the firm’s products unless it under-takes a largescale selling and promotion effort.
Example; Life-Insurance
4- Marketing philosophy;
Holds that achieving organizational goals
depends on knowing the needs and wants of
target markets and deliver value to compete in
the marketplace. The job is not to find the
right customers for your product, but the
right products for your customers.
Dell, Marriott, Disney… Figure 3.
5-Societal marketing philosophy;
Balances human welfare, company profits and
consumer satisfaction
Example; Johnson & Johnson Credo “ honesty,
integrity, and people before profit”. Figure 4
Many calls from the Healthy Associations warn
people form the consequences results from
Fast Food chains.
Figure 3
Selling
philosophy
Marketing
philosophy
Starting
point
Focus
Means
Ends
Existing Selling
Factory products Promoting
Profits
Through
Sales volume
Customer Integrated
Market needs
Marketing
Profits
Through
Customer
Satisfaction
Social Marketing philosophy
Figure 4
Society
(Human being)
Consumers
Want satisfaction
Company
(profits)
•
Building Relationships
Relationships span from the basic to tight
integrated relationships.
Successful relationships are built on:
–
–
–
Financial benefits; like VIP, Airline frequent miles
Social benefits; like member of clubs, magazines
Structural ties; like tracking orders online.
Partner Relationship Marketing
–
–
–
Every department in an organization contributes to
customer satisfaction.
Suppliers are carefully controlled through supply chain
management.
Strategic alliances create new opportunities to delight
customers.
• Outcomes of creating customer value;
1- Customer loyalty and retention; delighted
customers remain loyal and talk favorably to others
about the company and its products, and turn to be
life-time value.
2- share of market and share of customer ; many
companies are increasing their variety of products and
services to increase their profits form existing
customers. Amazon offer videos, toys, electronics,
beside books.
3- customer equity; is the total combined customer lifetime values of all the company’s customers. They view
customers as an assets need to be maximized. Figure 5
Figure 5
less loyalty
High
Profitability
Low
profitability
high loyalty
Butterflies
True friends
Good fit between company’s Good fit between company’s
Offerings and customer’s
Offerings and customer’s
Needs. High profit potential Needs, highest profit potential
Strangers
Barnacles
Little fit between company’s Limited fit between company's
Offerings and customer’s
Offerings and customer’s
Needs, lowest profit potential
Needs, low profit potential
New Marketing Technologies
• Technology has changed how marketers
build value.
– Internet and e-commerce/e-business.
– Fast and global communications.
– Wireless technologies.
• International trade is the new frontier.
• Globalization
• “Capitalism”
Ethics and Responsibility
• Worldwide consumerism and
environmentalism movements exert.
pressure for greater responsibility
• Seeking ways to make a profit by serving
the best long-run interests of customers
and communities.