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Marketing:
Managing Profitable Customer
Relationships
ROAD MAP: Previewing the Concepts
• Define marketing and outline the steps in the marketing
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process.
Explain the importance of understanding customers and
the marketplace, and identify the five core marketplace
concepts.
Identify the key elements of a customer-driven
marketing strategy and discuss the marketing
management orientations that guide marketing strategy.
Discuss customer relationship management and
strategies for building lasting customer relationships.
Describe the major trends and forces that are changing
the marketing landscape in this new age of
relationships.
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What Is Marketing?
• Simple Definition: Marketing is
managing profitable customer
relationships.
Goals:
1. Attract new customers by promising
superior value.
2. Keep and grow current customers
by delivering satisfaction.
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Marketing Old vs. New
Old view of marketing:
Making a sale -- “Telling and Selling”
New view of marketing:
Satisfying customer needs
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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.
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A Simple Model of the Marketing Process
Create value for customers and
build customer relationships
Understand the
marketplace and
customer needs
and wants
Design a customerdriven marketing
strategy
Construct a
marketing program
that delivers superior
value
Capture value from
customers in return
Build profitable
relationships and create
customer delight
(pleasure)
Capture value from
customers to create
profits and customer
equity (value)
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What are Consumers’
Needs, Wants, and
Demands?
This Is a Need
Needs - state of felt
deprivation
(deficiency)
including physical,
social, and
individual needs.
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Types of Needs
• Physical:
– Food, clothing, shelter, safety
• Social:
– Belonging, affection
• Individual:
– Learning, knowledge, self-expression
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This Is a Want
Wants - form that
a human need
takes, as
shaped by
culture and
individual
personality.
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This Is Demand
Wants
Buying Power
“Demand”
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Need / Want Fulfillment
• Needs and Wants
Fulfilled through a
Marketing Offer :
– Some combination of
products, services,
information, or
experiences offered to a
market to satisfy a need
or want.
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What Satisfies Consumers’
Needs and Wants?
Products
Anything that can be Offered to a Market to Satisfy a Need or Want
Persons
Places
Information
Organizations
Ideas
Services
Activity or Benefit Offered for Sale That is Essentially
Intangible and Does Not Result in the Ownership of Anything
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Product as an Idea
Products do not
have to be physical
objects. Here the
“product” is an
idea—protecting
animals.
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Value and Satisfaction
Expectation
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Performance
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Expectation
Performance
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If performance is lower than expectations, satisfaction is low.
If performance is higher than expectations, satisfaction is high.
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Exchange vs. Transaction
• Exchange:
– Act of obtaining a desired object from
someone by offering something in return.
• Transaction:
– A trade of values between two parties.
– One party gives X to another party and
gets Y in return. Can include cash, credit,
check, or barter.
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What is a Market?
• The set of actual
and potential buyers
of a product.
• These people share
a need or want that
can be satisfied
through exchange
relationships.
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Elements of a Modern Marketing
System
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Marketing Management
• The art and science of choosing target
markets and building profitable
relationships with them.
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Segmentation and Target Marketing
#1
#2
Market Segmentation:
Divide the market into
segments of customers
Target Marketing:
Select the segment to
cultivate (promote)
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Marketing Management
Demand
Management
Demarketing
Finding and increasing
demand, also changing or
reducing demand, such as in
demarketing.
Temporarily or permanently
reducing the number of
customers or shifting their
demand.
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Marketing and Sales Concepts Contrasted
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The Marketing Mix
Product
Price
Customer
Needs
Promotion
Distribution
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Customer Relationship Management
• The process of
building and
maintaining
profitable customer
relationships by
delivering superior
customer value and
satisfaction.
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Customer Perceived Value
(comparing the marketing offer with competition)
• 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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Customer Perceived Value
Is FedEx’s service worth the higher price? FedEx thinks so. It
promises reliability, speed, and peace of mind. FedEx ads say
“Need to get it there or else? Don’t worry. There’s a FedEx for
that.”
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Customer Satisfaction
• Dependent on the
product’s perceived
performance relative
to a buyer’s
expectations.
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Customer Relationship Levels
Basic
Relationship
Continuum
(range)
Full
Partnership
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Partner Relationship Marketing
Partners Inside the Firm
1. All employees customer
focused
2. Teams coordinate efforts
toward customers
Partners Outside the Firm
1. Supply chain management
2. Strategic alliances
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Customer Loyalty & Retention (preservation)
• Customer Lifetime Value
– The entire stream of
purchases that the customer
would make over a lifetime of
patronage (investment)
• Share of Customer
– The share a company
gets of the customers
purchasing in their
product categories.
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Customer Lifetime Value
To keep customers coming back, Stew Leonard’s has created the
“Disneyland of dairy stores.” Rule #1—the customer is always
right. Rule #2—if the customer is ever wrong, reread Rule #1.
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Customer Equity
• Customer equity:
is the total
combined
customer lifetime
values of all the
company’s
customers.
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Customer Relationship Groups
Butterflies
High
Good fit between
company’s offerings and
customer’s needs; high
profit potential
True Friends
Good fit between
company’s offerings and
customer’s needs; highest
profit potential
Profitability
Strangers
Low
Little fit between company’s
offerings and customer’s
needs; lowest profit
potential
Barnacles
Limited fit between
company’s offerings and
customer’s needs; low
profit potential
Short-term
customers
Long-term
customers
Projected loyalty
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