A Global Perspective
1
Marketing: Managing
Profitable Customer
Relationships
Philip Kotler
Gary Armstrong
Swee Hoon Ang
Siew Meng Leong
Chin Tiong Tan
Oliver Yau Hon-Ming
Learning Objectives
After studying this chapter, you should be able to:
1. Define marketing and outline the steps in the marketing
process
2. Explain the importance of understanding customers and
the marketplace, and identify the five core marketplace
concepts
3. Identify the key elements of a customer-driven marketing
strategy and discuss the marketing management
orientations that guide marketing strategy
4. Discuss customer relationship management, and identify
strategies for creating value for customers and capturing
value from customers in return
5. Describe the major trends and forces that are changing the
marketing landscape in this age of relationships
1-2
Chapter Outline
1. What Is Marketing?
2. Understanding the Marketplace and Customer
3.
4.
5.
6.
7.
8.
Needs
Designing a Customer-Driven Marketing Strategy
Preparing an Integrated Marketing Plan and
Program
Building Customer Relationships
Capturing Value from Customers
The New Marketing Landscape
So, What Is Marketing? Pulling It All Together
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What Is Marketing?
Marketing Defined
Marketing is the process by which
companies create value for
customers and build strong
customer relationships to capture
value from customers in return.
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What Is Marketing?
The Marketing Process
•
•
•
•
•
Understand the marketplace and customer
wants and needs
Design a customer-driven marketing strategy
Construct a marketing plan that delivers
superior value
Build profitable relationships and create
customer satisfaction
Capture value from customers to create profit
and customer equity
1-5
Understand the
marketplace and
customers’ needs/wants
Create customer driven
marketing strategy
Build profitable relationships
& create customer delight
Construct a marketing
program that delivers
superior value
Capture value from
customers to create profits
& customer quality
1-6
Understanding the Marketplace
and Customer Needs
Customer Needs, Wants, and Demands
Needs are states of deprivation:
• Physical—food, clothing, warmth, safety
• Social—belonging and affection
• Individual—knowledge and self-expression
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Understanding the Marketplace
and Customer Needs
Customer Needs, Wants, and Demands
•
•
Wants are the form that needs take as they are
shaped by culture and individual personality.
Demands are wants backed by
buying power.
1-8
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.
1-9
Understanding the Marketplace
and Customer Needs
Customer Value and Satisfaction
Satisfaction is derived from comparing performance
with expectations
Expectations
• Customers make choices according to
•
•
Values and satisfaction of various market offerings
Marketers
•
•
Set the right level of expectations
Not too high or too low
1-10
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 consists of actions to build and
maintain desirable exchange relationships.
1-11
Understanding the Marketplace
and Customer Needs
•
•
Markets are the set of actual and potential buyers
of a product.
Marketing system consists of all of the actors
(suppliers, company, competitors, intermediaries,
and end users) in the system who are affected by
major environmental forces: Demographic; Economic;
Physical; Technological; Political-legal; Socio-cultural
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Elements of a Modern Marketing System
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Designing a Customer-Driven
Marketing Strategy
Marketing Management
•
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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Designing a Customer-Driven
Marketing Strategy
Selecting Customers to Serve
•
•
Market segmentation: Dividing the
markets into segments of customers
Target marketing: Which
segments to go after
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Designing a Customer-Driven
Marketing Strategy
Selecting Customers to Serve
•
De-marketing
• Marketing to reduce demand temporarily or
permanently
• The aim is not to destroy demand but to reduce or
shift it.
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Designing a Customer-Driven
Marketing Strategy
Selecting Customers to Serve
Marketing management is:
• Customer management
• Demand management
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Designing a Customer-Driven
Marketing Strategy
Choosing a Value Proposition
The value proposition is the set of benefits or
values a company promises to deliver to
customers to satisfy their needs.
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Designing a Customer-Driven
Marketing Strategy
Marketing Management Orientations
•
•
•
•
•
Production concept
Product concept
Selling concept
Marketing concept
Societal concept
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Designing a Customer-Driven
Marketing Strategy
Marketing Management Orientations
The production concept is the idea that
consumers will favor products that
are available or highly affordable.
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Designing a Customer-Driven
Marketing Strategy
Marketing Management Orientations
Product concept is the idea that consumers will
favor products that offer the most quality,
performance, and features for which the
organization should therefore devote its energy
to making continuous improvements.
1-21
Designing a Customer-Driven
Marketing Strategy
Marketing Management Orientations
Selling concept is the idea that consumers will not
buy enough of the firm’s products unless it
undertakes a large scale selling and promotion
effort.
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Designing a Customer-Driven
Marketing Strategy
Marketing Management Orientations
Marketing concept is the idea that achieving
organizational goals depends on knowing the
needs and wants of the target markets and
delivering the desired satisfactions better than
competitors do.
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Customer Driven vs. Customer
Driving Marketing
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Designing a Customer-Driven
Marketing Strategy
Marketing Management Orientations
Societal marketing concept is the idea that a
company should make good marketing decisions
by considering consumers’ wants, the company’s
requirements, consumers’ long-term interests,
and society’s long-run interests.
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Preparing an Integrated Marketing
Plan and Program
Marketing Mix
The marketing mix is the set of tools (four Ps) the firm
uses to implement its marketing strategy:
• Product – create a need-satisfying market offering
• Price – decide how much it will charge for the offer
• Promotion – communicate with target customers about
the offer and persuade them of its merits
• Place – decide how it will make the offer available to
target consumers
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Preparing an Integrated Marketing
Plan and Program
Integrated Marketing Program
An integrated marketing program is a
comprehensive plan that communicates and
delivers the intended value to chosen customers.
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Building Customer Relationships
Customer Relationship Management (CRM)
Customer relationship management is the overall
process of building and maintaining profitable
customer relationships by delivering superior
value and satisfaction.
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Building Customer Relationships
Customer Relationship Management (CRM)
Customer perceived value is the difference between
total customer value and total customer cost of a
market offering relative to those of competing
offers.
Customer satisfaction is the extent to which a
product’s perceived performance matches a
buyer’s expectations.
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A Customer’s Perception of Value
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Building Customer Relationships
Customer Relationship Management (CRM)
Customer Relationship Levels and Tools
• Basic relationship (with low-margin customers)
• Full relationships (with high-margin/key customers)
Developing strong bonds with customers through
• Frequency marketing programs
• Club marketing programs
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Building Customer Relationships
The Changing Nature of Customer Relationships
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

Relating with more carefully selected customers uses
selective relationship management to target fewer,
more profitable customers.
Relating for the long term uses customer relationship
management to retain current customers and build
profitable, long-term relationships.
Relating directly uses direct marketing tools (telephone,
mail order, kiosks, Internet) to make direct connections
with customers.
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Building Customer Relationships
Partner Relationship Management
Partner relationship management refers to working
closely with partners in other company
departments and outside the company to jointly
bring greater value to customers.
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Building Customer Relationships
Partner Relationship Management
•
Partners inside the company is every function area
interacting with customers.
• Electronically
• Cross-functional teams
•
Partners outside the company is how marketers
connect with their suppliers, channel partners, and
competitors by developing partnerships.
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Building Customer Relationships
Partner Relationship Management
•
The supply chain is a channel that stretches
from raw materials to components to final
products to final buyers.
• Supply management
• Strategic partners
• Strategic alliances
1-35
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.
1-36
Capturing Value from Customers
Growing Share of Customer
Share of customer is the portion of the customer’s
purchasing that a company gets in its product
categories.
1-37
Capturing Value from Customers
Building Customer Equity
Customer equity is the total combined customer
lifetime values of all of the company’s
customers.
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Capturing Value from Customers
Building Customer Equity
•
Building the right relationships with the right
customers involves treating customers as assets
that need to be managed and maximized.
• Different types of customers require different
relationship management strategies
• Build the right relationship with the right
customers
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The New Marketing Landscape
Major Developments
Digital age
• Globalization
• Ethics and social responsibility
• Not-for-profit marketing
• The new world of marketing relationships
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The New Marketing Landscape
The New Digital Age
•
•
•
•
•
Recent technology has had a major impact on the ways
marketers connect with and bring value to their
customers
Market research
• Learning about and tracking customers
Create new customized products
Distribution
Communication
• Video conferencing
• Online data services
1-41
The New Marketing Landscape
The New Digital Age
Internet—creates marketplaces and
Marketspaces
• Information
• Entertainment
• Communication
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The New Marketing Landscape
Rapid Globalization
•
•
The world is smaller
Think globally, act locally
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The New Marketing Landscape
The Call for More Ethics and Social Responsibility
Marketers are being called upon to take greater
responsibility for the social and environmental
impact of their actions in a global economy.
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The New Marketing Landscape
The Call for More Ethics and Social Responsibility
Social marketing campaigns encourage energy
conservation and concern for the environment
or discourage smoking, excessive drinking, and
drug use.
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The New Marketing Landscape
The Growth for Not-for-Profit Marketing
• Colleges
• Hospitals
• Museums
• Zoos
• Orchestras
• Religious groups
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Pulling it All Together
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