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- Philip Kotler
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Chapter 1
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Objectives





Defined marketing, and marketing process.
Examine five core customer and marketplace
concepts.
Identify the elements of a customer-driven
marketing strategy and discuss the marketing
management orientations.
Discuss customer relationship management and
creating value for and capturing value from
customers
Describe the major trends and forces changing the
marketing landscape
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What is Marketing

The simplest definition of marketing is :
“ managing profitable customer relationship”

The two main goals of marketing is:
1.
Attract new customer by promising superior value
2.
To keep and grow current customer by delivering
satisfaction.
The key is delivering your promise
Wal-Mart “Always low price Always”
AT&T “it’s within your reach”
Dell “be direct”
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Marketing Defined
 Kotler’s definition:
“Marketing is a social and managerial process by which
individuals and groups obtain what they need and want
through creating and exchanging value with others”

Marketing definition in the scope of business:
The process by which companies create value for
customers and build a strong customer relationship in
order to capture value from customer in return.

In the sense of satisfying customer needs,
 Marketers should understand consumer needs, develops
products that provide superior value, and price, distributes,
and promotes them effectively.
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The Marketing Process
Create value for the customer and
build customer relationship
Understan
ding the
market
place and
customer
needs
and wants
Design a
customerdriven
marketing
strategy
Construct
marketing
program
that
deliver
superior
value
Capture value
from customer
in return
Build
profitable
relationshi
p and
create
customer
delight
Capture
value
from the
customers
to create
profits
7
The Marketing Process
Understanding
the market place
and customer
needs and
wants
Design a
customer
-driven
marketing
strategy
Construct
marketing
program
that
deliver
superior
value
Build
profitable
relationsh
ip and
create
customer
delight
Capture
value
from the
customer
s to
create
profits
8

Marketing Core Concepts:
Customer
needs,
wants, and
demands
Markets
Exchange
and
relationship
Market
offeringsproducts,
services,
and
experience
s
Customer
value and
satisfaction
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Maslow’s Hierarchy of Needs
Selfactualization
Personal
growth
and fulfillment
Esteem needs
Self-esteem, confidence,
achievement, respect of others,
respect by others
Social needs
Belonging, and love needs
Family, friends, affection, relationships
Safety needs
Protection, security, order, law, limits, stability, etc
Physiological needs
Breathing, food, water, sleep
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Needs, Wants, and Demand

Needs
 The state of deprivation
○ Example: Food

Wants
 The form human needs take as shaped by culture and
individual personality
○ Example: Want a big Mac

Demands
 Human wants that are backed by buying power

To understand customer needs wants and demands
marketers conduct consumer research and analyze
customer data
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Marketers
Manage
Demands
Influence
Wants
Discover
Needs
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Market offerings

Customers’ needs and wants are fulfilled through a
market offering

Marketing offering are “Some combination of
products, services, information, or experiences
offered to a market to satisfy a need or want."

Marketing offers are not limited to physical
products, it includes services, activities, or benefits
offered for sale that are intangible and do not
result in the owner ship of anything“ Example:
banking, airline, hotel…”.

Market offers It also includes other entities, such
as persons, place, organization, information, and
ideas.
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Market Offers

Marketing myopia
“the mistake of paying more attention to the specific
product a company offers then to the benefits and
experiences produced by these products” (the drill)

Marketers shouldn’t focus only on existing wants and
lose sight of underlying customer needs … … … …
…... they should create brand meaning and brand
experiences (Example: Coca-Cola, Nike)

The product is only a tool to solve a consumer
problem.
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Customer Value and Satisfaction

Customer form expectations about the value of various
marketing offers and buy accordingly.

How do buyers form there expectations?
 Past buying experience.
 The opinions of friends.
 market and competitor information and promises

Customer satisfaction depend on how well the product’s
performance lives up to the customer’s expectations.
Marketers must be careful to set the right level of
expectation.
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Exchanges and Relationship

The act of obtaining a desired object from someone by
offering something in return

The marketer tries to bring about a response to some
market offering. The response may be more then
buying (example: political candidate wants votes, orchestra
wants an audience, and a social action group wants idea
acceptance)

One exchange is not the goal, relationships with
several exchanges are the goal

Relationships are built through delivering value and
satisfaction
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Markets

The Market is:
“ The set of actual and potential buyers of a
product or service, who share a particular
need or want.”

Marketers should work to:
 understand
the needs and wants of specific
markets.
 Select the market they can serve best.
 Developing products and services to satisfy
customers in this market.
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Markets
Markets:
Marketers often use the term markets to cover
various grouping of customers.
 Need markets (the diet-seeking market)
 Product markets (shoe market)
 Demographic markets (the youth market)
 Geographic markets (the French market)
They view sellers as constituting the industry
and the buyers as constituting the market
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Elements Of A Modern Marketing System
Company
(marketer)
Marketing
intermedia
ries
Suppliers

Marketing involves serving a
market of final consumer in
the face of competitors

Each party in the system
adds value for the next level

All the arrows represent
relationship that must be
developed and managed,
thus a company’s success
at
building
profitable
relationship depends not
only on its own action but
also on how well the entire
system serves the needs of
final consumer

All the actors in the system
are affected by major
environmental forces
Final
users
Competito
rs
Major environmental forces
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The Marketing Process
Understandi
ng the
market
place and
customer
needs and
wants
Design a customer-driven
marketing strategy
Construct
marketing
program
that deliver
superior
value
Build
profitable
relationship
and create
customer
delight
Capture
value from
the
customers
to create
profits
21
Designing a Customer-Driven
Marketing Strategy

Marketing management
“is the art and science of choosing target markets
and building profitable relationships with them.”
This definition must include answer to two questions
1.
What customers will we serve? (segmentation and
targeting)
2.
How can we serve these customers best? (value
proposition)
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Select Customer to Serve

Marketers decide who they will serve by dividing
the market into segments of customers. And select
which segment they will go after (target marketing).
 Market segmentation: “ dividing a market into
different groups with similar needs, characteristics, or
behaviors”
 Target marketing: the process of evaluating each
market segment’s attractiveness and selecting one or
more segment to enter.
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Select Customer to Serve

Demand management
Marketers must deal with different demand states
ranging from no demand to too much demand.
Marketing managers must decide which customer they
want to target, and on level, timing, and nature of
their demand to meet the organization objectives.
Simply
Marketing management is: customer management and
demand management
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Demand States
Negative Demand
• Consumer dislike the product and may even pay a price to avoid it (vaccination)
Nonexistent Demand
• Consumer may be unaware or uninterested in the product (very advanced technology)
Latent Demand
• Consumer may share a strong need that cannot be satisfied by an existing product (cancer medicine)
Declining Demand
• Consumer begin to buy the product less frequently or not at all (pocket-calculator)
Irregular Demand
• Customer purchase vary on a seasonal, monthly, weekly, daily, or even hourly basis (ACs)
Full Demand
• Consumer are adequately buying all products put into the market place (FMCG)
Overfull Demand
• More consumer would like to buy the product than can be satisfied (bread – transportation)
Unwholesome Demand
• Consumer may be attracted to products that have undesirable social consequences (drugs)
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Choosing the Value Proposition

The company then must decide how it will serve
targeted customer-how it will differentiate and
position it self.
 Differentiation: the way that you make your business or
product more desirable than all the others like it. (Example:
Mercedes “Unlike any other” – BMW “Ultimate Driving
Machine”)
 Positioning: Is the process by which marketers try to
create an identity in the minds of their target market for its
product, brand, or organization. It is the image their
product occupies in a given market as perceived by the
target market. (Example: Honda – BMW)
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Choosing the Value Proposition
 Value
Proposition:
“Is the set of benefits or values a company
promises to deliver to consumers to satisfy
their needs.
It answer the customer’s question:
“why should I buy your brand rather than a
competitor’s?” (Red Bull Gives You Wiiings)
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Marketing Management
Orientations

The production concept:
The philosophy that consumers will favor products that are
available and highly affordable and that management
therefore should focus on improving production and
distribution efficiency. (Example: Ford, model T 1908-1927)

The product concept:
The idea that consumers will favor products that offer the most
quality, performance, and features and that the organization
should therefore devote energy to making continuous
product improvements. (Example: the mousetrap)
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Marketing Management
Orientations

The selling concept
The idea that consumers will not buy enough of the organization’s
products unless the organization undertakes a large scale selling and
promotion effort. (Example: unsought products - blood donation)

The marketing concept
The marketing management philosophy that holds that achieving
organizational goals depends on determining the needs and wants of
target markets and delivering the desired satisfactions more
effectively than competitors do.
The job is not to find the right customer for your product, but to fined the
right product for your customer. (Example: Dell, Wal-Mart)
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The Selling And Marketing
Concept Contrasted
Starting
point
The selling
concept
“Inside-out”
Factory
Make
and sell
The
marketing
concept
“Outside-in”
Market
Sense
and respond
Focus
Means
Existing
products
Selling and
promoting
Ends
Profits throw
sales volume
Hunting
Finding the right customer for your product
Consumer
need
Integrated
marketing
Profits throw
customer
satisfaction
Gardening
Find the right product for your customers
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Marketing Management Orientations

The societal marketing concept
The idea that the organization should determine the
needs, wants and interests of target markets and
deliver the desired satisfactions more effectively and
efficiently than do competitors in a way that maintains
or improves the consumer’s and society’s well
being.(Example: fast-food industry)
Society
(human welfare)
Consumer
(want satisfaction)
Societal
marketing
concept
company
(profit)
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The Marketing Process
Understandi
ng the
market
place and
customer
needs and
wants
Design a
customerdriven
marketing
strategy
Construct marketing
program that deliver
superior value
Build
profitable
relationship
and create
customer
delight
Capture
value from
the
customers
to create
profits
32
Preparing a Marketing Plane and
Program

The marketing plane actually deliver the value to the
target customer, by transforming the marketing
strategy into actions.

The marketing plane consists of the firm’s marketing
mix, which called the four Ps
 Product: to deliver on it’s value proposition the firm must
first create a need-satisfying market offering.
 Price: it must decide how much it will charge for the offer.
 Place: and how it will make the offer available to target
customer.
 Promotion: it must communicate with target customer
about the offer and persuade them of its merits.
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Marketing Mix and the Customer
Four P’s
Four C’s
Product
 Price
 Place
 Promotion


Customer solution
 Customer cost
 Convenience
 Communication
Every marketing tool is designed to deliver a customer benefit and value
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The Marketing Process
Understan
ding the
market
place and
customer
needs and
wants
Design a
customerdriven
marketing
strategy
Construct
marketing
program
that deliver
superior
value
Build profitable
relationship and create
customer delight
Capture
value from
the
customers
to create
profits
35
Building Customer Relationships

Customer
CRM
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.”
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CRM

Why the emphasis on retaining and growing
customers?
 There is fewer customers to go around due to
sophisticated competitors, and overcapacity in most
industries
 costs 5 to 10 times MORE to attract a new customer
than it does to keep a current customer satisfied.
 The lifetime value of the customer. Is “the value of the
entire stream of purchases that the customer would
make over a life-time of patronage” (Example: Stew Leonard)

The key in building lasting customer relationship
is to create superior value, and satisfaction.
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Customer Rule
Everyone is committed to Rock Rule
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CRM
Attracting, Retaining, And Growing Customers

Customer value
 Customer perceived value:
○ The difference between total customer value and total
customer cost.
TCV – TCC = CPV
○ The customer evaluation of the difference between all
the benefits and all the cost of a marketing offer relative
to those of competing offers.

Customers often do not judge values and costs
accurately or objectively.

Customer often act on perceived value (Example:
FedEx)
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CRM

Customer satisfaction:
 Depend on the product’s perceived
performance relative to buyer’s expectations
 Performance matches expectations the
customer is satisfied, performance exceeds
expectations the customer is delighted.
 Satisfied customer repeat purchases, and
tell others.
40
The Marketing Process
Understandin
g the market
place and
customer
needs and
wants
Design a
customerdriven
marketing
strategy
Construct
marketing
program that
deliver
superior
value
Build
profitable
relationship
and create
customer
delight
Capture value from the
customers to create
profits
41
Capturing Value From Customer

Customer loyalty and retention:
 Loyalty increases as satisfaction levels increase
 Customer delight leads to emotional relationships
and loyalty
 loyal customers are less price sensitive.
 Customer Lifetime Value shows true worth of a
customer
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Capturing Value From Customer

Growing share of customer
 Share of customer’s purchase in a product
category.
 Cross-selling and up-selling (Example: Vodafone&
mobile phones – TE-Data, the wireless modem)
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Capturing Value From Customer

Building customer equity
 The total 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 and customer equity are
the name of the game. (Example: Cadillac and BMW)
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Customer relationships levels
and tools
 Target market nature decide the type the
relationship
 Basic relationship / low-margin customers
 Full partnership / high margin customers

Customer loyalty and retention tools
 Adding financial benefits – frequency marketing
programs (Example: Marie Louis)
social benefits –
programs (Example: Swatch)
 Adding
club
marketing
 Adding structural ties – special equipments
(Example: FedEx)
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Marketing Challenges in the 21st Century

The new digital age
 Growth of the Internet
 Advances in telecommunications, information,
transportation
○ Customer research and tracking
○ Product development
○ Distribution
○ New advertising tools
○ 24/7 marketing through the Internet

Rapid globalization
 Geographical and cultural distances have shrunk
○ Greater market coverage
○ More options for purchasing and manufacturing
○ Increased competition from foreign competitors
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Marketing Challenges in the 21st Century

The call for more ethics and social
responsibility
 Marketers need to take great responsibility for the
impact of their actions
○ Caring capitalism is a way to differentiate your company

The growth of not-for-profit marketing
 Many organizations are realizing the importance of
strategic marketing
○ Performing arts
○ Government agencies
○ Colleges
○ Hospitals
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Marketing Process
Understan
ding the
market
place and
customer
needs and
wants
Research
customer and
the market
place
Managing
marketing
information
and customer
data
Design a
customerdriven
marketing
strategy
Select
customer to
serve: market
segmentation
and targeting
Decide on
value
proposition:
differentiation
and positioning
Construct
marketing
program
that
deliver
superior
value
Build
profitable
relationshi
p and
create
customer
delight
Product and
service design:
building a
strong brand
Customer
relationship
management:
build strong
relationship
with chosen
customers
Create satisfied
loyal customer
Partner
relationship
management :
build a strong
relationship
with marketing
partners
Increase share
of market and
share of
customer
Price Create
real value
Distribution
manage
demand and
supply chain
Promotion
Communicating
the value
Capture
value from
the
customers
to create
profits
Capture
customer life
time value
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What Is Marketing?
Pulling It All Together
The process of building profitable
customer relationships by creating value
for customers and capturing value in
return
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