Marketing: Managing
Profitable Customer
Relationships
Chapter 1
Objectives
• Be able to define marketing
and discuss its core concepts.
• Be able to define marketing
management and compare the
five marketing management
orientations.
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Objectives
• Understand customer
relationship management and
strategies.
• Realize the major challenges
facing marketers in the new
“connected” millennium.
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1. Introduction
• a. Today’s successful companies at
all levels have one thing in common.
•
•
1). All successful companies are:
a). Strongly customer focused.
• b). Heavily committed to marketing.
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• b- To be successful an organization
motivates everyone in the organization to
produce superior value for their customers,
leading to high levels of customer
satisfaction.
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What is Marketing?
• Marketing is managing profitable
customer relationships
 Attracting new customers
 Retaining and growing current
customers
• “Marketing” is NOT synonymous
with “sales” or “advertising”
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2. What is Marketing?
• a. Creating customer value
and satisfaction are at the very
heart of modern marketing
thinking and practice
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2. What is Marketing?
•
b. A very simple definition of
marketing is managing profitable
customer relationships.
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2. What is Marketing?
• 1). The twofold goal of
marketing is to attract new
customers by promising superior
value and to keep and grow
current customers by delivering
•
satisfaction.
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• 2). Sound marketing is critical
to the success of every
organization.
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• c. You already know a lot about
marketing—it’s all around you.
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Marketing Defined
• d. Many people think of marketing
only as selling and advertising.
• 1). Marketing is no longer “telling
and selling.”
• 2). Today, marketing’s new sense
is concerned with satisfying
customer needs.
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What is Marketing?
• Kotler’s social definition:
“Marketing is 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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Needs, Wants, and Demands
• f. Human needs are the most
basic concept underlying
marketing.
• -a human need is a state of felt
deprivation
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1).
Humans have many complex needs.
• a). Basic, physical needs for food,
clothing, warmth, and safety.
• b). Social needs for belonging and
affection.
• c). Individual needs for knowledge
and self-expression.
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• 2). These needs are part of the
basic human makeup.
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• g. Another concept in marketing is
human wants. A human want is the
form that a human need takes as
shaped by culture and individual
personality.
• h. Demands are human wants that
are backed by buying power.
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• 1). Consumers view products as
bundles of benefits and choose
products that give them the best
bundle for their money
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• i. Outstanding marketing
companies go to great lengths to
learn about and understand their
customer’s needs, wants, and
demands.
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What is Marketing?
Many Things Can Be Marketed!
• Goods
• Places
• Services
• Properties
• Experiences
• Organizations
• Events
• Information
• Persons
• Ideas
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Marketing Offers—Products, Services, and
Experiences
• j. Companies address needs by
putting forth a value proposition, a
set of benefits that they promise to
consumers to satisfy their needs.
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• 1). The value proposition is 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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• 2). The concept of product is
not limited to physical objects
and can include experiences,
persons, places, organizations,
information, and ideas.
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• 3). Be careful of paying attention
to the product and not the benefit
being satisfied.
• 4). “Marketing myopia” is caused
by shortsightedness or losing sight
of underlying customer needs by
only focusing on existing wants
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• 5). Smart marketers create
brand meaning and brand
experiences for consumers.
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What is Marketing?
Core Marketing Concepts
• Needs, wants,
and demands
• Marketing offers:
including
products,
services and
experiences
• Value and
satisfaction
• Exchange,
transactions and
relationships
• Markets
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Value and Satisfaction
• k. Customer value is the difference
between the values that the
customer gains from owning and
using a product and the costs of
obtaining the product. Customers
form expectations about the value of
various marketing offers and buy
accordingly.
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• l. Customer satisfaction depends on
a product’s perceived performance
in delivering value relative to a
buyer’s expectations. Customer
satisfaction is a key influence
on future buying behavior
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• 1). Marketers must be careful to set
the right level of expectations.
• 2). Customer value and customer
satisfaction are key building blocks for
developing and managing customer
relationships.
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Exchanges, Transactions, and
Relationships
• m. Marketing occurs when
people decide to satisfy needs
and wants through exchange.
Exchange is the act of obtaining
a desired object from someone
by offering something in return.
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• n. Whereas exchange is a core
concept of marketing, a
transaction (a trade of values
between two parties) is
marketing’s unit of
measurement. Most involve
money, a response, and action.
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• o. Marketing consists of actions
taken to build and maintain
desirable exchange relationships
with target audiences involving a
product, service, idea, or other
object.
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Markets
• p. The concepts of exchange
and relationships lead to the
concept of a market.
market is the set of actual and
potential buyers of a product.
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• 1). Originally a “market” was a place
where buyers and sellers gathered to
exchange goods (such as a village
square).
• 2). Economists use the term to
designate a collection of buyers and
sellers who transact in a particular
product class (as in the grain or housing
market).
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• 3). Marketers see buyers as
constituting a market and sellers
constituting an industry.
•
4). Marketers are
keenly interested in markets
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Marketing
• q. The concept of markets
brings one full circle to the
concept of marketing.
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• 1). Sellers must search for buyers, identify
their needs, design good products and
services, set prices for them, promote them,
and store and deliver them.
•
2). A modern marketing system
includes all of the elements necessary to bring
buyers and sellers together. This might include
such activities as product development,
research, communication, distribution,
pricing, and service.
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• 3). Each of the major actors in a
marketing system adds value for the
next level of the system. There is
often critical interdependency
among network members.
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Marketing Management
• Marketing management is “the art
and science of choosing target
markets and building profitable
relationships with them.”
 Creating, delivering and
communicating superior customer
value is key.
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• 1). Marketing management
involves managing demand, which
in turn involves managing customer
relationships
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Marketing Management
• Customer Management:
 Marketers select customers that can
be served well and profitably.
• Demand Management:
 Marketers must deal with different
demand states ranging from no
demand to too much demand.
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Customer and Demand
Management
• b. Marketing management is
concerned not only with finding
and increasing demand, but also
with changing or even reducing
it.
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• 1). Demarketing’s aim is to reduce
demand temporarily or permanently
(move traffic away from a popular
tourist attraction during peak demand
times).
• 2). In reality, marketing anagement is
customer management and demand
management
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Marketing Management
Marketing Management
Management Orientations
• Production
concept
• Product concept
• Selling concept
• Marketing
concept
• Societal marketing concept
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4. Marketing Management
Orientations
• a. There are five alternative
concepts under which organizations
conduct their marketing activities:
the production, product, selling,
marketing, and societal marketing
concepts.
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The Production Concept
• b. The production concept holds that
consumers will favor products that are
available and highly affordable and that
management should, therefore, focus on
improving production and distribution
efficiency. This is one of the oldest
philosophies that guides sellers
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• c. The production concept is
useful when:
• 1). Demand for a product exceeds
the supply.
• 2). The product’s cost is too high
and improved productivity is
needed to bring it down.
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• d. The risk with this concept is in
focusing too narrowly on company
operations. Do not ignore the
desires of the market. This concept
can lead to “marketing myopia.”
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The Product Concept
• e. The product concept states that
consumers will favor products that
offer the most quality,
performance, and features, and that
the organization should, therefore
devote its energy to making
continuous product improvements.
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• 1). Some manufacturers mistakenly
believe that if they “build a better
mousetrap,”consumers will beat a path
to their door just for their product.
• 2). The product concept can also lead
to “marketing myopia,” the failure to
see the challenges being presented by
other products.
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The Selling Concept
• f. Many organizations follow the
selling concept. The selling concept
is the idea that consumers will not
buy enough of the organization’s
products unless the organization
undertakes a large-scale selling and
promotion effort.
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• 1). This concept is typically practiced
with unsought goods (those that buyers
do not normally think of buying).
• 2). To be successful with this concept,
the organization must be good at
tracking down the interested buyer and
selling them on the product benefits.
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• 3). Industries that use this concept
usually have overcapacity. Their aim is
to sell what they make rather than make
what will sell in the market
• 4). There are not only high risks with
this approach but low satisfaction by
customers.
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The Marketing Concept
• g. The marketing concept holds
that achieving organizational goals
depends on determining the needs
and wants of target markets and
delivering the desired satisfactions
more effectively and efficiently than
competitors do.
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• 1). Under the marketing concept,
customer focus and value are paths
to sales and profits
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• h. The marketing and selling concepts are
often confused. The primary differences
are:
•
1). The selling concept takes an
“inside-out” perspective (focuses on existing
products and uses heavy promotion and selling
efforts).
•
2). The marketing concept takes an
“outside-in” perspective (focuses on customer
needs, values, and satisfactions).
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• i. Many companies claim to adopt the
marketing concept but really do not unless
they commit to market-focused and customerdriven philosophies.
• 1). Customer-driven companies research
current customers to learn about their desires,
gather new product and service ideas, and test
proposed product improvements
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• 2). Such customer-driven marketing usually
works well when there exists a clear need and
when customers know what they want.
• 3). When customers do not know what
they want, marketers can try customerdriving marketing—understanding customer
needs even better than customers themselves
do, and creating products and services that
will meet existing and latent needs now and in
the future.
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The Societal Marketing Concept
• j. The societal marketing concept holds
that the organization should determine
the needs, wants, and interests of target
markets. It should then deliver the
desired satisfactions more effectively and
efficiently than competitors in a way
that maintains or improves the
consumer’s and the society’s well-being.
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• 1). The societal marketing concept is the
newest of the marketing philosophies.
• 2). It questions whether the pure marketing
concept is adequate given the wide variety of
societal problems and ills.
•
3). According to the societal
marketing concept, the pure marketing
concept overlooks possible conflicts between
short-run consumer wants and long- run
consumer welfare.
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• 4). The societal concept calls
upon marketers to balance three
considerations in setting their
marketing policies:
a). Company profits.
b). Customer wants.
c). Society’s interests.
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• 5). It has become good business
to consider and think of society’s
interests when the organization
makes marketing decisions.
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CRM
• CRM – 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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CRM
• It costs 5 to 10 times MORE
to attract a new customer than
it does to keep a current
customer satisfied.
• Marketers must be concerned
with the lifetime value of the
customer.
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CRM
Key Concepts
• Attracting,
retaining and
growing customers
• Building customer
relationships and
customer equity
• Customer value/satisfaction
 Perceptions are key
 Meeting/exceeding
expectations creates
satisfaction
• Loyalty and retention
 Benefits of loyalty
 Loyalty increases as
satisfaction levels increase
 Delighting consumers
should be the goal
• Growing share of customer
 Cross-selling
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CRM
Key Concepts
• Attracting,
retaining and
growing customers
• Building customer
relationships and
customer equity
• Customer equity
 The total combined
customer lifetime
values of all
customers.
 Measures a firm’s
performance, but in
a manner that looks
to the future.
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CRM
Key Concepts
• Attracting,
retaining and
growing customers
• Building customer
relationships and
customer equity
• Customer relationship
levels and tools
 Target market typically
dictates type of
relationship
Basic relationships
 Full relationships

 Customer loyalty and
retention programs
Adding financial benefits
 Adding social benefits
 Adding structural ties

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Marketing Challenges
• Technological advances, rapid
globalization, and continuing social
and economic shifts are causing
marketplace changes.
• Major marketing developments can
be grouped under the theme of
Connecting.
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Marketing Challenges
Connecting
• Via technology
• With customers
• With marketing
partners
• With the world
• Advances in computers,
telecommunications,
video-conferencing, etc.
are major forces.
 Databases allow for
customization of
products, messages and
analysis of needs.
• The Internet
 Facilitates anytime,
anywhere connections
 Facilitates CRM
 Creates marketspaces
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Marketing Challenges
Connecting
• Via technology
• With customers
• With marketing
partners
• With the world
• Selective relationship
management is key.
 Customer profitability
analysis separates
winners from losers.
• Growing “share of
customer”
 Cross-selling and upselling are helpful.
• Direct sales to buyers
are growing.
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Marketing Challenges
Connecting
• Via technology
• With customers
• With marketing
partners
• With the world
• Partner relationship
management involves:
 Connecting inside
the company
 Connecting with
outside partners
 Supply
chain
management
 Strategic alliances
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Marketing Challenges
Connecting
• Via technology
• With customers
• With marketing
partners
• With the world
• Globalization
 Competition
 New opportunities
• Greater concern for
environmental and
social responsibility
• Increased marketing
by nonprofit and
public-sector entities
 Social marketing
campaigns
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